Trump Tariffs Loom Over Mexico, Canada: Would the US Auto Industry Suffer?

The fate of trade relations between the U.S. and its two most immediate neighbors, Canada and Mexico, hangs in the balance as President Donald Trump decides whether or not to follow through with his policy of enacting a 25% tariff on goods being imported from both nations.

According to the Associated Press, nearly every retail category could see fallout from the decision at the consumer level — should the tariffs go through. From produce to alcoholic beverages and from cars and trucks to textiles, a wide spread of price increases could be in the cards as of Feb. 1 if the tariffs end up being levied on Canada and Mexico.

The neighbor to the north isn’t taking things passively, either. Given that Trump’s stated aim was to curb illegal immigration and the passage of fentanyl through both borders, Canadian officials have redoubled efforts to contain both issues with a $1.3 billion plan, as CTV News reported.

“I won’t sugar coat it. Our nation could be facing difficult times in the coming days and weeks,” Prime Minister Justin Trudeau said of the increasing likelihood that Trump would enact his planned tariffs.

“It’s not what we want, but if he moves forward, we will also act,” Trudeau added in later remarks.

As the AP noted, Canadian politician Doug Ford, premier of the province of Ontario, has signaled that all American alcoholic beverages would be stripped of store shelves if Trump does press forward with tariffs. This could be significant, given that Ontario is Canada’s most populous province, and that Canada is the No. 2 global market for American spirits.

Mexico’s president, Claudia Sheinbaum, was equally committed to reaction should tariffs be enacted upon Mexican goods.

“Now it is very important that the Mexican people know that we are always going to defend the dignity of our people, we are always going to defend the respect of our sovereignty and a dialogue between equals, as we have always said, without subordination,” Sheinbaum said.

Trump’s Tariffs Could Harm US Auto Sector

An analysis from The Economist spelled out some ominous projections in the event that the president’s tariffs do become reality. Among these:

• The price of the average car in the United States would increase by about $3,000, per Wolfe Research.
• Detroit’s big three carmakers — Stellantis, General Motors, and Ford — would have profits entirely erased unless they passed along the increased costs to consumers, according to Barclays.
• A quarter of Tesla’s parts are imported from Mexico, so the leading EV automaker would also face increased cost pressures.
• Volkswagen would be faced with a ~$3.4 billion bill as a result of tariffs, being highly exposed due to Mexican production, as Daniel Roeska of Bernstein underscored.

President Trump stood resolute behind his commitment to tariffs on Jan. 30, speaking to the subject from the Oval Office, as The Financial Post detailed.

“We’ll be announcing the tariffs on Canada and Mexico for a number of reasons,” Trump began.

“Number one is the people that have poured into our country so horribly and so much. Number two are the drugs, fentanyl and everything else that have come into the country. Number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of deficits,” he added.