Executive Orders Raise Concerns for Automakers Amid Tariff Threats
Washington, DC - President Donald Trump's return to the White House has sparked a flurry of executive actions, casting a shadow over the automotive industry.
Despite failing to impose tariffs initially, Trump suggested levies on Mexican and Canadian auto imports could take effect on February 1. These tariffs, potentially 25%, would significantly impact the Big Three (GM, Ford, Stellantis) and European automakers (Volkswagen, BMW, Mercedes).
Currently, many automotive manufacturers have production facilities in Mexico, Canada, and Europe, resulting in complex supply chains. GM produces pickups in all three locations, while Ford assembles vehicles in Mexico and Canada. Volkswagen builds the Tiguan SUV in Mexico, and BMW produces the M2 sports car there.
Industry analysts project that tariffs could lead to a 17% loss in core profits for automakers. However, some believe the tariffs may be a negotiating tactic rather than an actual policy. RBC analyst Tom Narayan stated that the potential impact on the auto industry is severe enough to deter Trump from implementing them.
Narayan noted the reliance on Canadian and Mexican supplier components, including the concentration of the entire car seat industry in Mexico. Shifting production to the US would be time-consuming and costly, posing significant challenges for suppliers.
Furthermore, the automotive industry would face inflationary pressures and production disruptions if tariffs were imposed. Pras Subramanian, a reporter for Yahoo Finance, highlights the potential crippling impact on the US auto industry.