Trump’s tariff plan could add $2K to American-made car prices

A proposal by President-elect Donald Trump to impose sweeping tariffs on imports from Mexico and Canada could have a huge impact on the U.S. automotive business. But will Trump actually follow through on the idea amid mounting concerns about the potential fallout on the American economy?

The details: Trump – who announced the plans on his Truth Social page – framed the tariffs as a response to the fentanyl crisis in the U.S. and migrants entering the country illegally.  

• The president-elect – who said he will issue an executive order to pass the tariffs once in office –  also proposed raising tariffs on China imports by 10% to stop the flow of fentanyl into the U.S.

Digging in: Imposing 25% tariffs on Mexico and Canada – which some believe could violate the United States-Mexico Trade Agreement – could negatively impact American automakers in several ways, most notably vehicle pricing, according to various reports. 

• Collectively, the top 10 automakers with manufacturing facilities based in Mexico built 1.4 million vehicles over the course of the first six months of this year alone.

• 90% of those 1.4 million cars manufactured in Mexico are shipped across the border to be sold to U.S. buyers.

• According to Wells Fargo, the tariffs would add $2.1K to the price of a vehicle made by U.S. automakers. As for entire vehicles produced in Mexico or Canada, car buyers can expect to pay between $8K – $10K more.

Digging deeper: GM – among all the U.S. manufacturers – would likely be the automaker impacted the most if Trump were to impose the 25% tariffs on Mexico and Canada.

• GM is expected to import more than 750,000 vehicles from Mexico and Canada this year, with most of those vehicles being shipped from south of the border.

• The automaker’s vehicle imports from Mexico and Canada include some of GM’s most popular vehicles, totaling nearly 370,000 Chevy Silverado or GMC Sierra pickups and almost 390,000 mid-size SUVs.

• GM also builds two electric vehicles in Mexico – the Chevy Equinox and Blazer SUVs.       

Bigger picture: GM certainly isn’t alone in terms of the potential fallout. 

• From January to July 2024, Ford exported 195,595 vehicles from Mexico, with 90% of the cars going to the U.S. 

• Nissan – which is reportedly facing a dire financial situation – shipped 181,587 vehicles to North America from Mexico during the six-month period, 90% of which went to the U.S.       

• Stellantis – in the thick of a major overhaul of its North American business operations – exported 174,476 vehicles from Mexico from January to July, with 90% of them shipped to the U.S. 

What they’re saying: Government officials from Mexico, Canada, and China have responded to Trump’s post about imposing tariffs, with one of the strongest statements coming from Mexico.  

• "No one will win a trade war or a tariff war" and "the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality,” commented Liu Pengyu, a spokesperson for the Chinese embassy in Washington.

• “To compare us to Mexico is the most insulting thing I’ve ever heard from our friends and closest allies, the United States of America,” Ontario Premier Doug Ford said. “I found his comments unfair. I found them insulting. It’s like a family member stabbing you right in the heart,” added Ontario Premier Doug Ford.

• “Seventy percent of the illegal weapons seized from criminals in Mexico come from your country. We do not produce these weapons, nor do we consume synthetic drugs. Tragically, it is in our country that lives are lost to the violence resulting from meeting the drug demand in yours,” stated Mexican President Claudia Sheinbaum.

Earlier this month, Mexico’s Economy Minister also reportedly warned that tariffs imposed by the incoming Trump administration would be countered with tariffs on U.S. exports to Mexico, which were $324.3 billion in 2022, according to the Office of the United States Trade Representative.

Weighing it all: One thing’s certain, the president-elect won’t likely be swayed easily. Any final decision about the tariffs will probably be made by Trump and Trump alone. However, the ramification could impact thousands of people in the U.S. auto industry and beyond for years to come.

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