A car carrier waits patiently in line beside the U.S.-Mexico border wall, ready to cross into the United States through the Otay commercial port in Tijuana, Mexico, on January 22, 2025.
— Guillermo Arias | AFP | Getty Images
### DETROIT — The global auto industry is in suspense as President Donald Trump considers rolling out 25% tariffs on imports from Canada and Mexico, which could start as soon as Saturday.
Automakers have been adopting a “wait-and-see” stance regarding the potential tariffs from the Trump administration. After his inauguration this month, Trump promised the imposition of these tariffs, targeting February 1st as a possible start date for duties on these vital U.S. trade partners.
Brands like General Motors — the leading seller in the U.S. — are desperately seeking clarity to adapt their business strategies to whatever policy is enacted. Tariffs are essentially taxes on imported foreign goods. Companies that import these goods must pay these taxes, and there’s a concern that these costs might just be passed down to consumers, potentially driving up vehicle prices and decreasing demand.
This trade uncertainty dealt a heavy blow to GM on Tuesday, as its stock took a hit despite the company meeting Wall Street’s expectations for its 2025 projections and its performance in the fourth quarter.
Barclays analyst Dan Levy commented in a Wednesday investor note, “Our main takeaway from GM’s fourth-quarter earnings is that, while there’s a significant opportunity for GM, they have to navigate through the prevalent U.S. policy uncertainty right now.”
GM hadn’t factored in possible tariffs into its outlook, a “cautious” move according to CFO Paul Jacobson, since there haven’t been any duties on North American goods imposed yet. Both Jacobson and GM CEO Mary Barra assured investors that the company has backup plans for any potential actions, but this didn’t do much to calm the worried investors.
On Tuesday, Jacobson addressed investors, mentioning the inauguration, California wildfires, and more as issues. “We’re playing it safe until we get clearer market data as January was just too chaotic,” he explained.
### ‘Massive impact’
Tariffs could significantly disrupt the global automotive sector, potentially squeezing earnings for companies like GM, which have extensive manufacturing operations across North America.
S&P Global Mobility emphasized in a recent report that, “These comprehensive tariffs would have a huge impact on the automotive sector. Virtually no [automaker] or supplier” operating within North America would escape unscathed.
Many major automakers have facilities in the U.S. but still significantly depend on imports, particularly from Mexico, to satisfy American consumer demands. For instance, nearly all significant automakers in the U.S. have at least one plant in Mexico. These top six automakers alone accounted for over 70% of U.S. sales in 2024.
The industry is deeply integrated between these two countries, with Mexico importing almost half of all auto parts from the U.S., and in return, exporting a large majority back to the U.S., according to the International Trade Administration.
Wells Fargo estimates that implementing 25% tariffs on Mexican and Canadian imports could cost Detroit automakers billions annually. Their estimates on the impact of varying tariff levels on companies like GM, Ford Motor, and Stellantis could reach $13 billion, $25 billion, and $56 billion, respectively.
Moreover, S&P Global Mobility (formerly known as IHS Markit) suggests a 25% levy on a $25,000 vehicle arriving from Mexico or Canada would add $6,250 to its price, much of which might be passed on to the buyer.
### Automakers most at risk
S&P Mobility reveals that plants in Canada and Mexico produce around 5.3 million vehicles, with about 70% — nearly 4 million — intended for the U.S. Mexican plants account for most of these vehicles, with Ford, GM, Stellantis, Toyota, and Honda producing roughly 1.3 million light vehicles in Canada, primarily for the U.S. market, as per a Canadian manufacturing nonprofit research group.
While some automakers depend heavily on manufacturing in Mexico, the potential disruptions vary for different producers. On sales grounds, German brand Volkswagen faces the highest tariff exposure in Mexico, followed by Nissan and Stellantis, reports S&P Global Mobility.
On January 10, Antonio Filosa, Stellantis’ North American operations head, said, “We’re certainly working on different scenarios but need to wait for Mr. Trump’s and his administration’s decisions to adjust accordingly.”
Here’s how automakers scale in terms of exposure to tariffs on vehicles imported from Mexico, based on the percentage of their U.S. sales coming from Mexico:
– Volkswagen: 43%
– Nissan: 27%
– Stellantis: 23%
– GM: 22%
– Ford: 15%
– Honda: 13%
– Toyota: 8%
– Hyundai: 8%
