Trump’s new tariffs put the auto industry on high alert

President Donald Trump’s plans to impose stiff tariffs on Canada, Mexico, and China has left the auto industry in the middle of a trade dispute. And many of those likely to be affected by the measures, are weighing in.

[Update 4:57 a.m. EST February 4] First things first: The sweeping tariffs, which started on Tuesday, February 4, will require China to pay a 10% duty on their goods and services.

[Update: 4:52 a.m. EST February 4] China wasted no time hitting back after new U.S. tariffs took effect Tuesday. Starting February 10, China will put an extra 15% tariff on U.S. coal and liquefied natural gas imports. American crude oil, agricultural machinery, and certain cars will see a 10% tariff hike.

[Update 4:47 a.m. EST February 4] Late on Monday, February 4, Canadian Prime Minister Justin Trudeau and President Trump reached an agreement to pause the 25% tariff on Canadian imports to the U.S. for 30 days. As part of the negotiations, Canada will send 10,000 frontline workers to the border and appoint a “fentanyl czar” to help stop the flow of the illegal drug.

[Update 11:37 a.m. EST February 3]: Mexican President Claudia Sheinbaum announced this morning that the U.S. agreed to delay tariffs for one month after she committed to deploying 10,000 troops to the border.

• Canada is set to take a bigger hit from the tariffs, with about 75% of its exports heading to the U.S., compared to just 13% of American exports going north.

• In terms of motor vehicles and parts only, roughly 90% of exports from both Canada and Mexico are imported to the U.S., according to the Mexican Automotive Manufacturers' Association and the Canadian Vehicle Manufacturers' Association.

• In 2023, Mexico exported $153 billion in motor vehicles and car parts to the U.S. while Canada exported $58 billion, per Census Bureau data.

Follow the money: The reason for the sweeping tariffs largely has to do with the U.S. trade deficit and what President Trump called an “unfair relationship” with China in particular. Trade makes up 67% of Canada’s GDP, 73% of Mexico’s, and 37% of China’s—but only 24% of the U.S. economy. Yet in 2023, the U.S. ran the world’s largest goods trade deficit, surpassing $1 trillion.

Zooming in: Officials at the helm of many of the car companies that could be affected by the tariffs have remained mostly mum since President Trump enacted the measures this past weekend, likely working frantically to try to scenario plan for the impact. However, the levies have drawn a barrage of public criticism from those with deep ties to the industry.

• Matt Blunt, President of the American Automotive Policy Council, which represents Ford, GM, and Stellantis, said the tariffs undermine the billions invested in domestic and regional content requirements, raising the cost of building vehicles in the U.S. 

• The IAM Union, which represents 600,000 Canadian workers in the manufacturing sector (including automotive), stated the tariffs will lead to job losses, increased prices, and other negative impacts.

• China said it will file a lawsuit with the World Trade Organization regarding the tariffs and will “take necessary countermeasures.” 

Yes, but President Trump defended the measures on Sunday, posting on Truth Social that America might or not  feel some pain from the tariffs, but they will be, “Worth the price that must be paid.”

Between the lines: Beyond trade, President Trump had made his tariff decision key in his mission to stop the illegal flow of immigration and dangerous illicit drugs like fentanyl. And his has garnered support from Republican part members like U.S. Senator Bernie Moreno, Alaskan Governor Mike Dunleavy, U.S. Senator Lindsey Graham, and speaker Mike Johnson, among many others on X.

Looking ahead: Automakers like GM and Stellantis, which are poised to be impacted most by the tariffs, have indicated that they have been preparing for the tariffs, with plans to accelerate U.S. vehicle deliveries from facilities in Canada and Mexico and ramp up on U.S. vehicle production. However, industry analysts contend that those plans might not be enough to mitigate rising costs or protect production.

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