President Donald Trump is poised to impose 25% tariffs on Canada and Mexico as early as Saturday, causing significant concern across the global automotive industry. The threat of these tariffs has left automakers, such as General Motors, seeking clarity to effectively plan their business strategies. This move aligns with Trump's earlier promise to impose duties on key U.S. trading partners following his inauguration, with a target date initially set for February 1.
The uncertainty surrounding these potential tariffs has led automakers to adopt a "wait-and-see" approach over the past months. General Motors, the leading automaker in the U.S., is eager for resolution. With the industry deeply integrated across North America, the implications of these tariffs could be far-reaching. Mexico plays a pivotal role, with nearly every major automaker operating in the U.S. having at least one plant there. Furthermore, Mexico accounted for a majority of vehicles produced by five automakers in Canada, primarily destined for the U.S. market.
The financial impact of these tariffs is staggering. Barclays estimates that a 5%, 10%, and 25% tariff would cost General Motors, Ford Motor, and Chrysler parent Stellantis $13 billion, $25 billion, and $56 billion, respectively. S&P Global Mobility predicts that 25% tariffs on imports from Mexico and Canada could cost traditional Detroit automakers billions of dollars annually.
"We are working, obviously, on scenarios," said Antonio Filosa, head of Stellantis' North American operations.
The potential tariffs have already affected the financial landscape. General Motors saw its stock suffer significantly despite surpassing Wall Street's expectations in recent reports. The uncertainty in trade policies has been a considerable factor.
"There's just so much noise," remarked Paul Jacobson, CFO of General Motors.
"We're being cautious until we get a little bit more smooth data from the marketplace just because January was so noisy," he added.
Volkswagen stands out as the most exposed automaker to tariff risks in Mexico based on sales figures, followed closely by Nissan Motor and Stellantis. The interconnectedness of the industry is evident in trade statistics, with Mexico importing 49.4% of its auto parts from the U.S. and exporting 86.9% of its production back to American markets.
Automakers are keenly aware of the stakes involved. In the U.S., the top six selling automakers accounted for over 70% of sales in 2024. Any disruption in trade could have ripple effects throughout the supply chains and affect consumer prices.
"Our key take from GM's 4Q result is that while the opportunity for GM is highly compelling, US policy uncertainty must be navigated for the time being," stated Dan Levy, a Barclays analyst.