President Donald Trump has a certain knack for throwing people and sectors into disarray and panic, and that remains true for the automotive industry. It’s waiting with bated breath to see if his threats to impose a 25 percent tariff on imports from Canada and Mexico this weekend will actually go into effect. Car companies have been described by CNBC as taking a “wait-and-see” approach with these tariffs. Well, folks, the rubber is about to meet the road.
There’s been a lot of apprehension about when and if these tariffs will ever actually be implemented. Trump promised to impose those duties on day one of his new administration. That didn’t happen. Instead, he set a target date for February 1. Because of this lack of clarity, car companies are starting to get impatient and worried, according to CNBC.
Manufacturing plants in Canada and Mexico produce roughly 5.3 million vehicles per year. About 70 percent of them (about 4 million cars) are for the U.S. market, according to CNBC. That doesn’t even account for the fact many automakers heavily rely on production in Mexico for parts. The outlet says that, on a percentage of sales basis, Volkswagen is the most exposed to tariff risk in Mexico. The rest of the top five are Nissan, Stellantis, General Motors and Ford.
“Regardless of timing, these blanket tariffs would have a massive impact on the auto industry,” S&P Global Mobility said in a report this week. “Virtually no [automaker] or supplier” operating in North America would be immune, according to the report.
Most major automakers have factories in the U.S. However, they still rely heavily on imports from other countries including Mexico to meet American consumer demand.
Nearly every major automaker operating in the U.S. has at least one plant in Mexico, including the six top-selling automakers, which accounted for more than 70% of U.S. sales in 2024.
The industry is deeply integrated between the countries, with Mexico importing 49.4% of all auto parts from the U.S. In turn, Mexico exports 86.9% of its auto parts production to the U.S., according to the International Trade Administration.
Wells Fargo estimates that 25% tariffs on Mexico and Canada imports would cost the traditional Detroit automaker billions of dollars a year. The firm estimates the impact of 5%, 10% and 25% tariffs on GM, Ford Motor and Chrysler parent Stellantis would collectively be $13 billion, $25 billion and $56 billion, respectively.
S&P Global Mobility, formerly IHS Markit, estimates a 25% duty on a $25,000 vehicle from Canada or Mexico would add $6,250 to its cost — some if not most of which could be passed on to the consumer.
This lack of clarity has hit GM’s stock, as CNBC explains:
Uncertainty about trade took a toll on GM on Tuesday, when the automaker’s stock had one of its worst days in years even after it beat Wall Street’s expectations for its 2025 guidance and its top- and bottom-line for the fourth quarter.
“Our key take from GM’s 4Q [earnings] result is that while the opportunity for GM is highly compelling, US policy uncertainty must be navigated for the time being,” Barclays analyst Dan Levy said in an investor note Wednesday.
GM did not account for potential tariffs in its guidance, which CFO Paul Jacobson described as a “cautious” approach given no duties on North American goods have actually been implemented.
[…]
“There’s just so much noise,” Jacobson told investors Tuesday, citing the inauguration and California wildfires, among other issues and events. “We’re being cautious until we get a little bit more smooth data from the marketplace just because January was so noisy.”
Both Jacobson and CEO Mary Barra said General Motors has a number of contingency plans for whatever action the indecisive president makes regarding tariffs.
Before we go, here’s a quick reminder of how tariffs actually work, from CNBC:
A tariff is a tax on imports, or foreign goods, brought into the United States. The companies importing the goods pay the tariffs, and some fear the companies would simply pass any additional costs on to consumers — raising the cost of vehicles and potentially reducing demand.
I’m sorry if this is how you’re finding out that you, the consumer, end up paying the extra cost of a tariff. I wish you had known before the election.
For a full rundown on the situation with Trump, tariffs and automakers, head over to CNBC.
