According to industry analysts, President Trump’s tariffs on US imports in Canada and Mexico could lead to higher national vehicle prices and dent margins for car manufacturers.
The average price of $ 25,000 of a car imported from Mexico or Canada could increase $ 6,250 if tariffs take effect, according to an analysis of S&P global mobility. The automotive research firm predicts that importers would probably pass most of any increase in their costs for consumers.
“The automotive industry is at a critical situation,” said Michael Robinet, vice president of prognosis in S&P Global Mobility in a statement. “The proposed tariffs could not only inflate vehicle prices, but also interrupt production schedules, with estimates that suggest a potential decrease of 30% in production for high exposure vehicles once the tariffs are enacted, although only be short -term. ”
After President Trump on February 1 he signed an imposing executive order 25% of import tariffs From Canada and Mexico, together with a 10% tax on Chinese products, the White House on Monday Suspended those plans For residents of the United States of North America for at least a month to carry out negotiations.
If those conversations will produce an advance is uncertain. But in response to Mr. Trump’s pressure. Canadian Prime Minister Justin Trudeau and Mexican president Claudia Sheinbaum have pledged to intensify efforts to combat the flow of illicit and migrants drugs through their borders with the United States.
Trump administration sees tariffs as a form of Exact better terms with US business partners, as well as to take advantage of other policy profits. In a February 2 publication on social networks, Trump acknowledged that a new wave of rates could cause “A little pain” for AmericansBut he said that his broader vision for the country “will be worth the price to be paid.”
Impact on car manufacturers
While the 25% levies In Canada and Mexico they have stopped, car manufacturers are preparing the impact.
In a earning call with analysts on Wednesday, the CEO of Ford Motor Company, Jim Farley, said the company is positioned to administer “a few weeks of tariffs.” But a prolonged period of higher rates would eliminate the company’s profits, increase vehicle prices and slow down economic growth, he said.
“There is no doubt that tariffs at the level of 25% of Canada and Mexico, if they are prolonged, would have a great impact on our industry with billions of dollars of industry deleted industry and an adverse effect on jobs in the jobs of the USA, as well as the full value system in our industry, “said Farley. “Tariffs would also mean higher prices for customers.”
Farley said Ford has enough inventory, including the pieces, to withstand a couple of weeks of tariffs without having to send car components through the borders of the south and northern United States. However, in the long term, the company would have to “make some important strategy changes,” he said, including the construction of new plants in the United States to avoid taxes.
Trump has said that the highest tariffs would stimulate American and foreign companies to create more jobs in the US Costs would be reduced to US consumers.
The CEO of General Motors, Mary Barra, also alluded to the effects that tariffs could have in its business, saying that the company is considering restructuring its supply chain to cushion the coup of the rates.
“We are planning and we have several levers that we can throw,” Barra said in a earning call.
Apiv, which manufactures car parts, including vehicle software, hardware and electrical/electronic architecture, has also recently warned that potential tariffs could damage their supply chain.
“Very intertwined” economies
Approximately 3.6 million light vehicles were imported to the United States from Canada and Mexico in 2024, representing 22% of all car sales throughout the country, according to S&P Global Mobility. Mexico is the largest source of imports of American light vehicles, which represents approximately 15% of sales.
“The tariffs would really reach the automobile industry with force because the Motorized Vehicle Industries of the United States, Mexico and Canada are very intertwined,” Moneywatch Marcus Noland, an expert in commercial policies of the Peterson International Economics Institute, told CBS. “The pieces will cross the edge seven to eight times before the final assembly, and the rates are applied every time it crosses a part, so the costs would increase very quickly.”
The manufacturers could restart some production to the US. To avoid the levies, he said, but that would take time and require investing in new manufacturing and labor facilities.
“The amount of interruption that this would cause cannot be exaggerated,” said Nolan, adding that tariffs also “tank” the Mexican economy given how dependent it is in car exports to the US.
“If they begin to rise, you will have unemployed people along the American border, and the ironic is one of the reasons for this action was illegal migration, and it could actually encourage illegal migration. When damaging the Mexican economy, you, you, You would probably increase illegal migration levels, “he added.
Reshission of challenges
Automobile manufacturers are reflecting on actions to compensate for possible costs, according to manufacturing executives and supply chain experts. But increasing national production presents important challenges, analysts point out.
Production reformulation would increase manufacturing costs due to higher labor expenses and could contribute to existing labor shortage, according to S&P Global Mobility.
Duncan Angove, CEO of the digital supply chain company, Blue Yander, told CBS Moneywatch that he expects US car manufacturers to double in investing in artificial automation and intelligence to reduce production costs, noting that tariffs will reduce The profit margins of the companies or the results of the results in higher prices for consumers.
“Even before, there was a lot of investment in new technologies and automation,” he said. “But because they realize that they cannot approve all the increase in the rate with the consumer, they are making these investments to reduce costs.”
Meanwhile, if new cars prices increase, more American consumers would probably resort to the used car market, which would increase the prices of second -hand vehicles, he added.
“Bonanza” for foreign competitors
In Ford’s call call on Wednesday, Farley said that US tariffs in Canada and Mexico would not only harm US car manufacturers, but also benefit foreign competitors who are not subject to higher import tariffs, such as Hyundai of Korea and Honda and Toyota of Japan.
“If we are going to have a tariff policy that lasts a month or whatever, years, it is better to be integral for our industry,” Farley said. “We cannot simply select one place or another, because this is a bonanza for our import competitors.”
Tom Narayan, the main capital analyst of RBC Capital Markets, told CBS Moneywatch that prolonged tariffs would result in the United States “hurting US companies and helping Korean and Japanese companies.”
“If automobile manufacturers have to relax all discounts and raise prices to sell vehicles, then we are talking about volume decreases and major affordability for the automotive industry,” added James Picariello, senior automotive analyst at BNP Paribas Exane.
However, Picariello also believes that tariff American cars are currently only producing with approximately 55% capacity nationwide.
“You can obtain 1 million reformulated units within a reasonable scenario, and the Trump administration can declare a victory of some kind. Musting one million units to the United States sounds like a number large enough for the administration to announce,” said.
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