Ford CEO Jim Farley has warned that US President Donald Trump’s proposed tariffs on Canada and Mexico could have a “devastating” impact on the North American automotive industry.
Speaking at a conference reported by Automotive News, Mr Farley said the import tariffs – including a 25 per cent tax on goods from the country’s neighbours to the north and south – are more likely to weaken the nation’s carmakers rather than protect them.
“President Trump has talked a lot about making our US auto industry stronger, bringing more production here, more innovation to the US, and if this administration can achieve that it would be, I think, one of the most signature accomplishments,” Mr Farley said.
“So far what we’re seeing is a lot of cost and a lot of chaos.”
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“Let’s be real honest: Long-term, 25 per cent tariffs across the Mexican and Canadian border would blow a hole in the US industry that we have never seen.
“Frankly, it gives free rein to South Korean and Japanese and European companies that are bringing 1.5 to 2 million vehicles into the US that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.
“Meanwhile, we’re USMCA [United States-Mexico-Canada Agreement]-compliant for almost all of our content… and to have that kind of a size of a tariff would be devastating.”
At the same conference, General Motors CEO Mary Barra said the car giant has “started doing scenario planning and looking at what are the different things we can change, we can move, we can respond”.
“We are prepared when we know exactly what’s going to happen. Of course, if tariffs are longer, there’s additional things that we’ve studied that we know we can do from a capital-efficient way.”
The tariffs on Mexico and Canada were announced by President Trump shortly after he was sworn into office last month, and were initially due to be implemented on February 2.
However, following discussions with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum – who have both promised to meet President Trump’s border security demands – the US leader delayed the introduction of the tariffs by 30 days.
A report by The New York Times showed General Motors, Stellantis, Toyota and Honda all produce approximately 40 per cent of the vehicles they sell in North America in either Canada or Mexico, while Ford also builds cars and pickups across both nations.
Audi, BMW, Honda, Kia, Mazda, Nissan and Volkswagen all have Mexican car factories which export to the US.
Prime Minister Trudeau had threatened to impose a 25 per cent tariff on C$155 billion (A$171.7bn) worth of US goods, but this has also been delayed pending the outcome of the US tariff decision.
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