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President Donald Trump’s first day back in at the White House resulted in a flurry of executive orders and actions. And though he didn't follow through on his much-promised tariffs, he said they're coming soon — and they could lead to big problems for automakers.
"We are thinking in terms of 25% on Mexico and Canada," he said while signing a slew of executive orders in the Oval Office. "I think we are going to do it on Feb. 1," he said.
Tariffs on products from Canada and especially Mexico would be a huge financial hit for the Big Three — GM, Ford, and Stellantis — as well as European automakers such as Volkswagen, BMW, and Mercedes.
Currently, GM produces the Silverado and Sierra pickups in the US, Mexico, and Canada, and Ford sells Mexican-made Maverick pickups, Bronco Sport SUVs, and Mustang Mach-E EVs in the US. Volkswagen builds its volume seller, the Tiguan SUV, in Mexico, among other models, and even BMW produces its enthusiast sports car, the M2, at its plant in central Mexico.
S&P Global projects automakers could lose up to 17% of their annual core profits if Trump imposes tariffs on cars made in Mexico, Canada, and Europe.
Some auto analysts, however, think such tariffs are unlikely to come to fruition, with negotiations to come.
“I think the fact that it's pushed to February gives us some inclination that this probably is a negotiating tactic,” RBC analyst Tom Narayan said to Yahoo Finance.
Narayan said the potential impact of Trump's proposed tariffs on the auto industry would be so severe that Trump won’t actually follow through with them. After all, the tariffs weren’t implemented in Trump’s first term.
“If [tariffs] were to happen, it would be tremendously inflationary and not something that just is fixed overnight. You can't just shift production to the US,” Narayan said.
In addition, many supplier components for vehicles made in the US originate from Canada and Mexico. Narayan notes the entire car seat industry is based in Mexico, and it would take years and be “tremendously costly” to shift that production to the US.
“[It’s the] suppliers that are far more exposed, they can't do anything about it. And the overall US auto industry would really be crippled,” Narayan said.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram
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