In sporting terms it’s called an own-goal, and the player responsible will struggle to get an invite to the match after party: Has President Trump taken the ball and started running towards his own team's goal line when it comes to North American car production; and when will other sectors make similar calls?
Investors took no time to vent their angst with the shares of major automakers, like Ford, General Motors, and Stellantis, tanking yesterday in response to Trump’s new wave of tariffs.
UPDATE: US delays Mexico, Canada auto tariffs by one month
According to an analysis by S&P Global Mobility (S&P), North American vehicle production could fall by a third within only a week following United States President Donald Trump’s decision to impose 25% tariffs on imports from Canada and Mexico.
The leading provider of automotive intelligence in the U.S. expects tariffs, which took effect on Tuesday to play havoc with supply chains, increase production costs, and force car manufacturers to cut shifts or mothball plants.
Operational changes
Based on S&P’s initial numbers, around 20,000 fewer new cars will drive off the factory floor daily as a direct result of Trump’s tariffs: Over a year that’s in excess of 1 million fewer cars.
It’s understood that North America’s auto industry, which manufactures around 63,900 light-duty vehicles daily - with 65% assembled in the U.S., 27% in Mexico, and 8% in Canada - is preparing for a wave of major operational challenges.
Given that the automotive industry relies on a highly integrated supply chain - with some parts crossing borders multiple times before final assembly - tariffs add costs at each step, and are likely to be passed on to consumers.
“We’re going to see some plants drop shifts. We’re going to see some plants just slow build rates,” said Stephanie Brinley, associate director at S&P Global Mobility.
“It won’t be necessarily consistent across automakers.”
Spiralling costs
Industry groups have also warned that American consumers will end up picking up the tab for this latest round of trade barriers.
The Anderson Economic Group (AEG) estimates that full-size SUVs could see price increases of up to $9,000, while small cars could rise by $6,200.
AEG suspects higher-end models, like electric vehicles, which depend on Chinese-made components, may see the sharpest increases, with costs rising by as much as $12,200.
While automakers have up until now let their trade associations do the talking, Ford’s CEO Jim Farley previously raised concerns over prolonged tariffs erasing billions in industry profits and damaging American jobs.
Since then the American Automotive Policy Council, has picked up the mantle for the companies it represents like Ford, General Motors, and Stellantis and is vocalising calls for vehicles and parts meeting the content requirements of the US-Mexico-Canada Agreement (USMCA) to be exempt.
“Our American automakers, who invested billions in the U.S. to meet these requirements, should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States,” said Matt Blunt, president of the AAPC.
Echoing similar sentiments, the Alliance for Automotive Innovation - which represents most automakers selling in the U.S. - warned that no manufacturer will escape the wrath of these new tariffs.
“This isn’t hypothetical,” said CEO John Bozzella.
“Most anticipate the price of some vehicle models will increase – by as much as 25% – and the negative impact on vehicle price and vehicle availability will be felt almost immediately.”
Then there’s Nissan, which in a recent statement also noted that “sustained tariffs of this magnitude will have a negative impact on automotive manufacturers.”
Incendiary of chaos
Not to be outdone, Wall Street analysts and automotive executives have equated tariffs with throwing an incendiary of unnecessary chaos into the car making industry.
Changes to trade policy disruptions also change the table stakes for car manufacturers planning long-term capital investment. Unlike other industries, vehicle production cycles span years, requiring significant investments in plants and supply chains.
While Stellantis has urged the Trump administration to keep Canada and Mexico tariff-free, General Motors has already moved some vehicles into the U.S. from foreign plants.
In response to industry concerns, Trump argues that tariffs will ultimately bring auto manufacturing back to the U.S.
“The tariffs will drive massive amounts of auto manufacturing to MICHIGAN,” Trump posted on social media.
Whether this happens and when remains to be seen, but industry experts suggest talk of relocation displays a naivety about how the industry operates.
They have indirectly reminded Trump that the benefits of moving assembly plants, retooling facilities, securing new suppliers, and training workers are unlikely to happen within his four years as president.
“The auto industry doesn’t operate on political timelines,” said Bill Ford, executive chairman of Ford Motor Company.
“We can adjust to almost anything as long as we know what that path is, but what’s really hard for us is the constant change in policy.”
