US President Donald Trump has announced significant tariffs on his nation’s closest trading partners and its long-time enemy, which is set to have a significant impact on the automotive industry.
Last week, President Trump – who was sworn into office less than a month ago – announced the US would impose tariffs on China as well as Canada and Mexico from Tuesday, February 4.
This is despite President Trump being one of three leaders to sign the United States–Mexico–Canada Agreement for free trade between the nations in 2018, with the proposed tariffs in line to breach the agreement.
The proposal would see almost all goods from Canada and Mexico hit with a 25 per cent tariff, while President Trump pulled his punch on Chinese goods which will only incur a 10 per cent tariff.
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According to industry experts, the tariffs could have a significant impact on the US automotive sector, which heavily relies on importing parts and even whole vehicles from the three nations.
The New York Times reports General Motors, Stellantis, Toyota and Honda all produce approximately 40 per cent of all vehicles sold in North America in either Canada or Mexico, while Ford also builds cars and pickups across both nations.
Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association, told Automotive News the 25 per cent tariff on Canada and Mexico is “15 per cent higher than anybody’s profit margin”, warning it could have a devastating effect on the industry.
“The dominoes will fall as the quick debates happen on who is going to absorb the 25 per cent,” Mr Volpe said.
“Nothing that Donald Trump says will change the fact that he will bring his own industry to a screeching halt.”
The publication reports the flow-on effects of the tariffs could result in the loss of more than 100,000 automotive jobs in Canada, and about the same in the US and Mexico combined.
Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, said the tariffs will almost certainly lead to the loss of jobs.
“Tariffs on vehicles and parts will reduce North American vehicle production, increase vehicle prices, and lead to job losses at manufacturing facilities across the continent.”
In response to the US tariffs, Canadian Prime Minister Justin Trudeau has threatened to impose a 25 per cent tariff on C$155 billion (A$171.7 billion) worth of US goods.
Mexican President Claudia Sheinbaum has also pledged to retaliate against the US, however she has yet to detail what form this will take.
The introduction of the tariffs comes after the Biden Administration raised the tariff on certain Chinese imports including EVs from 25 to 100 per cent last year, not including the existing 2.5 per cent duty tax on all vehicles imported to the US.
It also increased the tariffs on lithium-ion EV batteries and related battery parts from 7.5 to 25 per cent.
