In a move set to disrupt the automotive industry, President-elect Donald Trump has announced plans to impose a 25% tariff on all imports from Canada and Mexico, a policy that could unravel decades of free trade under NAFTA and its successor, the USMCA.
The proposed tariffs have already rattled Wall Street, with shares of major automakers, including General Motors (GM) and Stellantis, falling sharply. GM and Stellantis, which produce highly profitable full-size trucks in Mexico, saw their stock prices drop by 7% and 4%, respectively, as analysts and investors weighed the potential impact.
The automotive sector heavily relies on Canada and Mexico for cost-effective vehicle assembly and parts manufacturing. In 2023 alone, GM’s plants in the two countries were responsible for producing nearly 1 million vehicles. Tariffs could not only raise production costs but also disrupt the supply chain, resulting in higher vehicle prices for U.S. consumers.
The tariffs would also affect other automakers, including Ford, Toyota, and Honda, though their exposure to Mexico and Canada varies. Industry analysts suggest that Trump’s announcement is likely a negotiation tactic aimed at extracting trade concessions, reminiscent of his strategies during his first term.
If implemented, the tariffs would mark a dramatic departure from the existing USMCA agreement, potentially increasing tensions with key U.S. trade partners. As negotiations loom, the auto industry and policymakers alike are bracing for significant economic and geopolitical consequences.
