By Nora Eckert, Kalea Hall, and David Shepardson
In response to U.S. President Donald Trump’s recent implementation of 25% tariffs on Canada and Mexico, the U.S. auto industry is facing uncertainty regarding the future of popular vehicles, particularly full-sized pickup trucks. This move has prompted industry leaders to hastily devise strategies to navigate the significant tax implications while also holding out hope for a potential resolution in Washington.
Following the enforcement of the tariffs, the White House provided some relief to the industry by announcing that many vehicles built in North America could be exempt if they already adhered to the intricate regulations outlined in the 2020 U.S.-Mexico-Canada Agreement’s rules of origin, established during Trump’s initial term in office. White House press secretary Karoline Leavitt assured reporters that a one-month exemption would be granted for autos meeting USMCA criteria, ensuring they are not disadvantaged, while reciprocal tariffs were scheduled to come into effect on April 2.
During a recent call with key automotive figures, including GM CEO Mary Barra, Ford CEO Jim Farley, Ford executive chair Bill Ford Jr., and Stellantis chairman John Elkann, Trump proposed a potential 30-day pause on USMCA-compliant vehicles in exchange for increased production within the U.S. While automakers have expressed interest in bolstering investments in the country, they are seeking clarity on tariff policies and vehicle emissions regulations before committing to significant changes.
Pickup-truck manufacturers, in particular, stand to benefit from such negotiations, given their reliance on consumers who align closely with Trump’s rural Republican base. Approximately one-third of U.S. pickups, spanning both American and foreign brands, are produced in Mexico and Canada, underscoring the significance of these trade relationships within the industry.
These trucks play a vital role in the American automotive landscape, driving substantial sales and profits for major manufacturers like General Motors, Ford, and Stellantis. With pickup owners skewing heavily towards Republican affiliation, any disruptions in production could have broader political and economic implications.
The temporary halt on tariffs offers a brief respite for the industry to maintain pricing stability, leveraging existing vehicle inventory to mitigate immediate consumer impacts. Nevertheless, dealers and industry experts remain vigilant, recognizing the need for swift resolutions to prevent potential disruptions in the market.
As automakers and suppliers grapple with the looming threat of higher costs, discussions are underway to explore strategies for minimizing the impact of tariffs and determining the extent to which these expenses may be passed on to consumers. Analysts predict that the tariffs could add an average of $3,000 to vehicle costs, with imported models from Canada and Mexico potentially facing a $7,000 increase. Given the premium pricing of full-size pickups, manufacturers may be compelled to adjust consumer prices to offset these additional expenses.
In light of these developments, industry stakeholders are closely monitoring the evolving situation, ready to adapt
Jeff Tamaroff, the Chairman of Tamaroff Auto Group, oversees Honda and Nissan dealerships in Michigan. In addition to the already high prices of vehicles, which began increasing sharply during the pandemic and have remained elevated, there could be additional costs. The average vehicle sales price reached $48,641 in January, as reported by Cox Automotive data. Among Detroit brands, GM’s Chevrolet and GMC pickups, along with Stellantis’s Ram, may be more affected by Trump’s taxes compared to Ford, as they produce a significant number of pickups in Mexico. Ford manufactures its F-series pickups in the United States, but also produces some truck engines in Canada, highlighting the interconnectedness of the economic relationships among the three North American trading partners. Industry research indicates that hardly any American vehicles are made entirely from American parts.
According to Barclays bank analysts, Mexico supplies up to 40% of parts in U.S. vehicles, while Canada contributes more than 20%. Suppliers anticipate covering some tariff costs and potentially facing further impacts if consumer demand weakens due to rising vehicle prices. Concerns also arise regarding the impact of tariffs on vehicle components that traverse borders before reaching their final destination. For instance, truck transmissions produced by German supplier ZF Friedrichshafen involve parts crossing borders multiple times before installation in vehicles.
The complex supply chain dynamics could result in significant financial repercussions for the industry, with potential impacts amounting to billions of dollars by 2025. Industry leaders, such as ZF North America President Ramiro Gutierrez, recognize the substantial consequences of tariffs on U.S. auto manufacturing. As the trade war persists, the American auto industry grapples with the need to adapt its supply chains. Despite previous investments to expand U.S. operations and avoid tariffs under the USMCA, some industry executives feel penalized for complying with the trade agreement. Ford CEO Jim Farley expressed concerns about the competitive landscape, suggesting that import competitors may benefit from the current trade policies.
The report highlights the recent tariff threats made by the U.S., noting that some competitors import goods from Asian countries where tariffs are minimal. This information was provided by Nora Eckert and Kalea Hall in Detroit, David Shepardson in Washington, and Eric Cox in Detroit. The editing was done by David Gaffen, Brian Thevenot, and Suzanne Goldenberg.
