December 1, 2024
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Find Out: The Shocking Impact of Trump’s Tariffs on the Car Industry

Find Out: The Shocking Impact of Trump’s Tariffs on the Car Industry

The automotive industry is on edge with President Trump’s looming threat of tariffs on Mexican and Canadian imports, particularly impacting major players like GM, Ford, and Stellantis. The intricate supply chains developed over the years are at risk, leaving industry experts and analysts scrambling to assess the potential fallout amidst a backdrop of declining demand for electric vehicles.

Which global automakers are most vulnerable to these tariffs? Mexico and Canada serve as vital manufacturing hubs for carmakers supplying the US market, making nearly all major manufacturers susceptible to the repercussions of tariffs. Stellantis, for instance, imports 40% of its vehicles from these countries, while GM and Ford rely on imports for 30% and 25% of their sales respectively. Without strategic interventions to counter the tariffs, projections suggest that the profits of these Detroit-based giants could take a severe hit.

European automakers like Volkswagen face a similar fate, with 45% of their US sales originating from Mexico and Canada. The Japanese counterparts, Nissan and Honda, also face significant exposure due to their reliance on Mexican manufacturing for US exports.

What would be the broader impact on supply chains in Mexico and Canada? While tariffs on fully assembled vehicles might be detrimental, the real threat lies in potential tariffs on individual car parts from these countries. Analysts foresee severe repercussions if parts sourced from Mexico and Canada are also subjected to tariffs, ultimately burdening the end consumer with higher costs.

The automotive industry’s reliance on Mexican and Canadian components is evident from statistics showing that a significant portion of US-assembled vehicles contain engines, transmissions, and various components from these countries. With 15% or more of the total component value sourced from Mexico in several instances, the disruption in supply chains would reverberate across the industry.

In an attempt to mitigate the impact, carmakers might consider ramping up production in the US, implementing cost-cutting measures, or raising prices to offset financial losses. While the “Detroit Three” have some leeway to shift production, European automakers like Volkswagen face a more challenging task.

Despite the industry’s resilience in the face of adversity, executives acknowledge the detrimental effects of protectionism and tariffs on the economy and call for strategic actions to navigate the uncertain terrain ahead. As the automotive landscape braces for potential upheavals, adaptation and innovation will be key to weathering the storm.

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