On Friday, U.S. President Donald Trump said that tariffs on automobiles could come as soon as April 2.
Trump has so far withheld further details on the automobile tariffs, like how much they might be or which countries could be targeted. However, in an interview with Fox News on Feb. 10, the president threatened “big tariffs on [Mexican] cars.”
The U.S. president has taken a litany of trade actions since taking office on Jan. 20. In early February, he imposed, then delayed, 25% tariffs on goods from Mexico and non-energy imports from Canada.
He then set a March 12 start date for 25% tariffs on steel and aluminum imports, both of which are major inputs for the auto industry, before ordering his economics team to devise plans for reciprocal tariffs on every country that taxes U.S. imports.
At a conference on Tuesday, Ford Motor Company Chief Executive Officer Jim Farley voiced support for Trump’s focus on making the U.S. auto industry stronger but admitted that “so far what we’re seeing is a lot of costs and a lot of chaos.”
Farley was also quoted by the New York Times as saying that a 25% tariff on Canadian and Mexican products would “blow a hole in the U.S. industry that we have never seen.”
This “hole” likely refers to the integrated automobile supply chain built up over several decades in North America. The New York Times wrote that “tens of billions of dollars’ worth of finished automobiles, engines, transmissions and other components are shipped each week across the U.S. borders with Canada and Mexico.”
Trump’s stance on auto tariffs, according to Reuters, is fueled by his view that the treatment of U.S. automotive exports in foreign markets is unfair. The European Union collects a 10% tariff on vehicle imports, four times the U.S. passenger car tariff rate of 2.5%.
However, the US-Mexico-Canada Agreement (USMCA) — a trade pact negotiated during Trump’s first term — lays out extensive rules of origin for the parts included in vehicles built in the three countries. All vehicles determined to have at least 75% of their parts originating from the three countries are not subject to tariffs.
“The reality is that the North American auto industry has spent decades of collaboration and trade and so much time and money building up these extremely integrated supply chains,” Tu Nguyen, an economist at RSM Canada, a Toronto-based consulting firm, told CBC News. “And there are a lot of car parts that are only made in one country.”
Matt Blunt, president of the American Automotive Policy Council, which represents the interests of Ford, General Motors and Stellantis, told Reuters he believes “that vehicles and auto parts that meet the USMCA requirements should not be subject to additional tariffs.”
The USMCA is scheduled for review in 2026 and, according to Reuters, a number of analysts view Trump’s comments as an opening bid to renegotiate the pact.
With reports from The New York Times, Reuters, Animal Político, CBC News and El Economista
Source: Mexico News Daily
