Trump's Threatened 25% Tariff on Auto Imports Creates Uncertainty for Industry
Automakers are navigating the uncertainty as Trump’s potential tariffs on imports from Canada and Mexico loom.
DETROIT — As President Donald Trump’s looming threat to impose a 25% tariff on imports from Canada and Mexico approaches, the global automotive industry is on edge, waiting for clarity.
For months, automakers have been adopting a “wait-and-see” stance regarding the Trump administration’s potential tariffs. Originally, Trump promised to introduce the tariffs following his inauguration this month, later targeting Feb. 1 as the potential start date for levies on these key U.S. trading partners.
Regardless of whether the tariffs come to fruition, companies like General Motors — the top-selling automaker in the U.S. — are seeking clarity on the situation to better plan their operations moving forward.
A tariff is a tax placed on imports, meaning the companies bringing in foreign goods would have to pay these duties. Many fear that these additional costs could be passed on to consumers, leading to higher vehicle prices and potentially reducing demand.
The uncertainty surrounding the tariff issue already caused a significant blow to GM's stock on Tuesday, even though the automaker exceeded Wall Street's earnings expectations for the fourth quarter and provided strong guidance for 2025.
Barclays analyst Dan Levy noted, “Our key take from GM’s 4Q earnings result is that while the opportunity for GM is highly compelling, U.S. policy uncertainty must be navigated for the time being.”
GM, in its guidance, did not factor in the potential tariffs, with CFO Paul Jacobson describing the approach as “cautious” due to the absence of any tariffs being enforced on North American goods as of yet. Both Jacobson and GM CEO Mary Barra stated that the company had contingency plans in place, but these assurances did little to calm investor concerns.
“There’s just so much noise,” Jacobson explained to investors, referring to the inauguration and other issues, including the California wildfires. “We’re being cautious until we get a little bit more smooth data from the marketplace just because January was so noisy.”
Potential Consequences for the Auto Industry
The implementation of tariffs could drastically impact the automotive industry, potentially reducing profits for companies such as GM, which have significant manufacturing operations across North America.
“Regardless of timing, these blanket tariffs would have a massive impact on the auto industry,” said S&P Global Mobility in a recent report. “Virtually no [automaker] or supplier” operating in North America would be immune to the repercussions.
Although most major automakers operate factories in the U.S., they still rely heavily on parts imported from countries like Mexico to meet U.S. consumer demand. Nearly every major car manufacturer in the U.S. has at least one plant in Mexico, including the six top-selling automakers, which accounted for over 70% of U.S. sales in 2024.
The automotive industry is highly interconnected between the U.S. and Mexico, with Mexico importing 49.4% of all auto parts from the U.S. and exporting 86.9% of its auto parts production to the U.S., according to the International Trade Administration.
Wells Fargo projects that a 25% tariff on imports from Mexico and Canada could cost the Detroit automakers billions annually. The firm estimates that the impact of 5%, 10%, and 25% tariffs on GM, Ford Motor, and Chrysler parent Stellantis would be $13 billion, $25 billion, and $56 billion, respectively.
S&P Global Mobility estimates that a 25% tariff on a $25,000 vehicle from Canada or Mexico would add $6,250 to its cost, a price hike that could potentially be passed on to consumers.
Which Automakers Are Most Vulnerable?
S&P Mobility’s report highlights that Canadian and Mexican plants produce around 5.3 million vehicles, with approximately 70% — nearly 4 million — destined for the U.S. Of those, a majority are produced in Mexico, with automakers like Ford, GM, Stellantis, Toyota, and Honda making up the bulk of production for the U.S. market.
Some automakers rely heavily on Mexican production, but the impact of potential tariffs will not be the same for all manufacturers. Volkswagen, for example, is the most exposed to tariff risks, with 43% of its U.S. sales being produced in Mexico, followed by Nissan (27%) and Stellantis (23%).
“We are working, obviously, on scenarios,” said Antonio Filosa, head of Stellantis’ North American operations. “But yes, we need to await his decisions, and after the decision of Mr. Trump and his administration, we will work accordingly.”
Here’s a breakdown of the automakers most exposed to tariffs on vehicles imported from Mexico, based on the percentage of U.S. sales produced there:
Volkswagen: 43%
Nissan: 27%
Stellantis: 23%
GM: 22%
Ford: 15%
Honda: 13%
Toyota: 8%
Hyundai: 8%
As the deadline nears, automakers remain on edge, hoping for clarity as the potential for tariffs continues to hang over their operations.