President-elect Donald Trump recently announced According to him, a new proposal for new tariffs will enter into force on his first day in office: 25% tariffs on imports from Mexico and Canada.
The new policy, which is intended to pressure them to crack down on cross-border traffic and migration, could hit the auto industry and raise car prices for consumers, according to a statement. Wells Fargo the analysts
Major car manufacturers General Motors and the star They are at serious risk because they “have the most (Mexican) exposure,” Wells Fargo analysts wrote.cars They are in the middle of Trump’s geopolitics.”
In two posts on Truth Social, Trump wrote that he would hit all goods from Mexico and Canada with 25% tariffs until those countries “cut down on drugs, especially fentanyl, and migrants crossing the border, apparently in violation of the free trade agreement,” per Reuters. Chinese goods would also face “an additional 10% tariff, on top of any additional tariffs.”
If enacted, a 25% tariff on auto parts from Canada or Mexico will add $2,100 to the consumer for each U.S.-assembled vehicle, according to Wells Fargo estimates. For complete vehicles produced in Mexico or Canada, consumers can expect to pay $8,000 to $10,000 more. “In total, we see $5 billion to $9 billion in EBIT risk for D3 before pricing or plant closures,” the bank wrote.
The tariffs in Mexico and Canada will be particularly harsh, since, like last year, the US is involved 83% of Mexican exports and more than 75% Canadian exports.
Consumers will pay the price
As Trump cited issues related to the two countries’ “open borders” rather than a particular economic imperative, Wells Fargo wrote, “there may be less risk at the border.
issues can be addressed.” However, the move highlights the high risk of Detroit’s 3 automakers: General Motors, Ford Motor Company and Chrysler.
The threat of tariffs would be a “two-alarm fire for the auto industry,” said Patrick Anderson, CEO of Michigan-based consultancy Anderson Economic Group. New York Times. “There probably isn’t a single assembly plant in Michigan, Ohio, Illinois and Texas that wouldn’t be immediately affected by the 25 percent tariff.”
About 16 percent of U.S. vehicle imports come from Mexico and Canada, and global automakers’ margins are roughly 9 percent, “so it would be difficult to offset a 25 percent tariff without raising (the) price.” HondaFord, GM and Stellantis currently have the largest US-based operating scale and parts of any automaker, meaning their prices would rise the least.
This is the worst-case scenario for hopeful car owners, as car prices have far outpaced inflation since the pandemic. That’s more than the average cost of a new car today $48,000; In 2019, this figure was slightly lower $37,000.
