U.S. Automakers Face Headwinds as Tariffs Loom

The U.S. automotive industry is bracing for potential headwinds as the U.S. administration considers imposing tariffs on imports from Canada and Mexico. The proposed tariffs, which could reach as high as 25%, have sent shares of major U.S. automakers, including General Motors (GM), Ford (F), and Stellantis (STLA), tumbling in recent trading sessions.

The automotive industry is deeply integrated across North America, with parts crossing borders multiple times during production. A 25% tariff on imports from Canada and Mexico would disrupt this supply chain, as components would be subject to duties each time they cross the border. This could lead to delays, increased costs, and potential shortages of parts, according to industry experts.

"Automotive companies on both sides of the U.S.-Mexico border could feel the most pain if President-elect Donald Trump moves forward with his proposed 25% tariffs on all imports from Canada and Mexico once he takes office Jan. 20," said John Lash, group vice president of product strategy at e2open, a connected supply chain software platform.

The tariffs would also increase the cost of imported parts and vehicles, which would be passed on to consumers in the form of higher vehicle prices. According to Wolfe Research analysts, a 25% tariff on Canada and Mexico would increase the cost of the average new car by about $3,000. This would make U.S. vehicles less competitive in the global market and potentially lead to job losses in the industry.

General Motors, Ford, and Stellantis have all warned that the tariffs could lead to job losses and plant closures. GM has already announced plans to cut 14,000 jobs in North America and Europe, citing increased competition from Chinese automakers and lower wholesale shipments. Stellantis has warned that it now expects adjusted 2025 operating margin of 5.5% to 7%, well below its previous estimate of a double-digit operating margin.

The potential impact of the tariffs on the U.S. automotive industry is significant, with over 10% of intraregional trade in North America equating to hundreds of billions of dollars in cross-border trade flows and millions of jobs. The broader negative economic outcomes associated with this scenario would likely limit its political durability, but the North American auto industry should still prepare itself for a prolonged period of elevated trade uncertainty and potential trade disruptions.



In conclusion, the proposed tariffs on Canada and Mexico would have a significant impact on the supply chain and production costs for U.S. automakers like GM, Ford, and Stellantis. The disruptions in the supply chain and increased production costs could lead to higher vehicle prices, job losses, and potential plant closures. The U.S. automotive industry should prepare itself for a prolonged period of elevated trade uncertainty and potential trade disruptions.