President-elect Donald Trump, still weeks away from assuming office, has already set the stage for potential upheaval in the North American automotive industry.
The proposed measures include a 25% tariff on imports from Canada and Mexico and a 10% levy on Chinese goods. If enforced, these tariffs could disrupt $1.3 trillion worth of trade, dealing a severe blow to industries dependent on imported components, particularly automakers.
The automotive sector, deeply entwined across North American borders, stands to suffer the most under Trump’s tariff plans. Automakers such as General Motors (GM), Ford, Stellantis, Toyota, and Hyundai rely heavily on Mexico and Canada for production. For instance, GM manufactures eight models in Mexico, Stellantis produces Ram trucks in Saltillo, and Toyota assembles Tacomas in Mexico and RAV4s in Canada. Together, imports of vehicles and parts from these two countries accounted for $211 billion in 2023, over half of the $403 billion in total vehicle imports to the U.S.
Experts have expressed concern about the economic fallout. Jack Rossbach, an international economics professor, noted the devastating impact of such tariffs on profit margins, saying, “A 25% tariff is quite high. If you have a 10% profit margin, then a 25% tariff completely wipes out that profit margin.”
The financial repercussions for automakers could be dire. S&P Global estimates that combined tariffs on imports from Mexico, China, and the EU could slash annual earnings for automakers by up to 17%. Wolfe Research warns that U.S. consumers might face a $3,000 price hike on average per vehicle due to the proposed tariffs.
Industry analyst Daniel Roeska labeled Trump’s tariff proposals a “disaster” for the domestic auto sector, particularly for Detroit’s “Big Three” manufacturers—GM, Ford, and Stellantis.
Opinions are divided on whether Trump’s threats represent a concrete plan or a negotiation tactic. The Mexican Association of the Automotive Industry (AMIA) has called for a measured response, emphasizing that cooperation between the U.S., Mexico, and Canada is essential to strengthen North America’s economic integration.
Flavio Volpe, president of the Canadian Automotive Parts Manufacturers Association, dismissed Trump’s rhetoric as typical of his negotiation style. He remarked, “The social media tactics are always more bombastic than the tough but reasonable negotiations.”
However, Trump’s tough talk has already sparked diplomatic action. Mexican President Claudia Sheinbaum assured Trump of Mexico’s efforts to manage migration, while Canadian Prime Minister Justin Trudeau held a meeting with Trump to address trade and energy issues. Despite these discussions, skepticism lingers about the feasibility of avoiding trade conflicts.