Pres. Donald Trump has warned he may announce tariffs of up to 25% against two major trade partners, Canada and Mexico, as early as Saturday, February 1. Additional tariffs targeting China may also be announced. The potential impact could be felt far and wide — especially in the auto industry, with manufacturers facing a threat to profits and consumers facing the risk of higher prices. Some familiar vehicles could also disappear from the market, especially entry-level models.
Trump could cause “chaos,” some industry insiders fear, by tearing up the current trade agreement with Canada and Mexico where plants like this GM Silao facility are located.
Should Pres. Donald Trump follow through on tariffs this weekend the move could have broad implications considering the three countries in his sights are America’s largest trade partners, Mexico number one on the list with $798 billion in goods and services exchanged between the two countries in 2023. Canada was second, at $773 billion, China third at $575 billion.
While details have yet to be announced, trade with Canada and Mexico covers a vast array of goods and services, including wood, electronics and petroleum. The northern neighbor also provides significant hydroelectric power to states such as New York.
Automotive manufacturing is high on the list of the industries expected to feel the brunt of any new tariffs. Automakers have long operated plants in Canada and Mexico and the manufacturing network has become tightly interwoven since the original North American Free Trade Agreement, or NAFTA, took effect on January 1, 1994. Any disruption could cause serious problems for both automakers and auto buyers, analysts and trade experts are warning. That could mean disruptions to production, the loss of some vehicles and components, and higher costs for consumers.
Bracing for the announcement
Trump walking with Tesla CEO Elon Musk shortly before his inauguration.
From the beginning of his campaign, Trump had made tariffs a key part of his platform, claiming partners such as Canada, Mexico and China are taking advantage of the U.S. Experts disagree on whether that’s accurate. But few believe higher tariffs would be enacted without a significant impact.
Research by S&P shows that there could be a disruption in cross-border shipments of both vehicle parts and fully assembled cars, trucks and crossovers.
The precise impact is unclear. “We don’t have numbers because we don’t know what the tariffs will be,” cautioned Stephanie Brinley, principal auto analyst with S&P Global Mobility. But the higher and more inclusive the tariffs, the research firm indicated, the greater the potential problem manufacturers could face.
What would be hit?
The new RAV4 could be among the vehicles directly hit by new tariffs on Canadian auto imports.
A variety of automotive goods could be targeted, literally from nuts and bolts to fully assembled vehicles.
At least three dozen different nameplates sold in the U.S. are assembled in Canada and Mexico. Among the most significant:
- Chevrolet Silverado and GMC Sierra, both 1500 and HD models; produced in Oshawa, Ontario. Silverado was the second best-selling vehicle in the U.S. in 2024;
- Toyota RAV4, assembled in Woodstock, Ontario;
- Honda CR-V, the fourth best-selling vehicle in the U.S. in 2024; assembled in Alliston, Ontario;
- Dodge Charger Daytona; new all-electric muscle car made in Windsor, Ontario, a gas version to follow;
- Chevrolet Equinox and GMC Terrain, entry level crossovers built in San Luis Potosi;
- Chevrolet Equinox EV, Chevy Blazer and Blazer EV, all built in Ramos Arizpe;
- Ford Maverick, popular compact pickup, imported from Hermosillo, Mexico.
Even vehicles assembled in the U.S. could feel the pinch as almost all contain some Canadian and Mexican content, notably including parts like wiring harnesses and built-up suspensions and other components.
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Who will actually pay?
While automakers might absorb some higher costs, most of any new tariffs likely would be passed on to buyers, experts warn.
Automakers have long operated as if the borders with Canada and Mexico are made of thin gauze. Goods travel between the three nations all but freely and, in many cases, vehicles parts wind up crossing back and forth as they are added to built-up components and, eventually, completely assembled vehicles. Experts have raised questions about how such good would be tracked and, eventually, covered by tariffs.
While Trump has repeatedly claimed that new tariffs would be absorbed by the country of origin, few experts agree. Data compiled by the U.S. International Trade Commission following enactment of tariffs against China during his first term indicates retail prices rose anywhere from 1.7% to 7.1% on items as diverse as clothing, car parts and computers.
That contributed to the general surge in inflation over the last few years, according to various reports, and helped push automotive prices to record levels – Cox Automotive reporting that the average transaction price for a new vehicle in December came in at around $50,000.
Were the new administration to enact an average 10% tariff on all U.S. imports, and 60% on Chinese goods, the Yale Budget Lab foresees a rise in consumer prices of 1.4% to 5.1%. For the typical household, that would translate into anywhere from $1,900 to $7,600 in spending.
Products could disappear
The 2025 Nissan Kicks is assembled in Mexico where low production costs help make it affordable to entry-level buyers.
Trump has positioned tariffs as a way to drive manufacturing back to the U.S. There is some evidence that auto manufacturers have found it lucrative to shift production to the States, with a number of new assembly, parts and component plants opening in recent years – and others to come.
The Hyundai Motor Group Metaplant in Georgia is one example. But it, and others, followed the carrot, rather than responding to the stick. A large number of the new factories focus on batteries and other EV components, as well as electric vehicles. They’re aimed at making vehicles like the Hyundai Ioniq 6 eligible for up to $7,500 in federal EV tax credits. Ironically, Trump appears ready to end those incentives which could result in lower EV demand and even lead some manufacturers to scuttle U.S. production plans.
Meanwhile, a number of industry executives have told Headlight.News their companies might have to halt importation of some low-cost products which would become less competitive if they had to pass on the tariffs. The margins on vehicles like the Nissan Kicks, built in Aguascalientes and Volkswagen Taos, are too small for carmakers to simply absorb tariff costs.
Tariffs would cause problems even for higher margin vehicles like the Chevy Silverado where automakers might hold down price hikes but then risk hurting their profitability.
“We know it will be difficult for several automakers to resource vehicles on the fly,” said S&P’s Brinley. While some models might be able to be moved to the U.S., others could simply be pulled from showrooms, either temporarily or for the long-term.
Low-end buyers would be particularly hard-hit, experts said, because products like the Kicks crossover simply can’t be produced in the U.S. at an affordable price tag.
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