Trump tariffs could quickly cut North American auto production

DETROIT — Roughly a third of vehicle production in North America could be cut by next week as a result of President Donald Trump’s 25% tariffs on Mexico and Canada, as automakers attempt to mitigate increased costs and buyers hold off on purchasing new cars and trucks.

That lost production would equate to roughly 20,000 units per day, according to a new analysis from prominent data and forecasting firm S&P Global Mobility.

The production impact as well as possibility of layoffs would continue to grow if the tariffs, which Trump implemented Tuesday, are not changed or lifted.

“We have a new dawn, to a degree. This is a significant move,” Stephanie Brinley, associate director in AutoIntelligence at S&P Global Mobility, said during a webinar with the Automotive Press Association.

S&P Global Mobility reports 25 automakers on average produce 63,900 light-duty passenger vehicles in North America per day. A majority of those, roughly 65%, are assembled in the U.S., followed by 27% in Mexico and 8% in Canada.

The affected production will vary by automaker, vehicle and plant location. It could mean a plant is completely idled or that it produces fewer vehicles that rely on parts that cross borders multiple times in different forms before being installed in a vehicle.

“I think we’re going to see some plants drop shifts. We’re going to see some plants just slow build rates,” Brinley said. “It won’t be necessarily consistent across [automakers]. It’s going to very much be about what they need and how much they need it.”

Shares of automotive stocks fell more than the broader market Tuesday as a result of the tariffs.

A tariff is a tax on imports, or foreign goods, brought into the United States. The companies importing the goods pay the tariffs, and some experts fear the companies would simply pass any additional costs on to consumers — raising the cost of vehicles and potentially reducing demand.

Several automakers this week declined to comment directly on the 25% tariffs, relying on past comments or trade associations to speak on their behalf.

The American Automotive Policy Council, which represents Ford Motor, General Motors and Stellantis — all of which are heavily affected by the tariffs — argues that vehicles and parts that meet the stringent domestic and regional content requirements of the United States-Mexico-Canada Agreement, or USMCA, should be exempt from the tariff increase.

“Our American automakers, who invested billions in the U.S. to meet these requirements, should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American workforce, while our competitors from outside of North America benefit from easy access to our home market,” said former Missouri Gov. Matt Blunt, president of AAPC, in a statement Monday night.

The Alliance for Automotive Innovation, a trade group representing the vast majority of automakers selling vehicles in the U.S., warned that no automakers will come out unscathed, resulting in increased consumer costs.

“This isn’t hypothetical,” the trade group’s CEO, John Bozzella, said in a statement. “All automakers will be impacted by these tariffs on Canada and Mexico. Most anticipate the price of some vehicle models will increase — by as much as 25 percent — and the negative impact on vehicle price and vehicle availability will be felt almost immediately.”

Nissan Motor late Monday said, “Sustained tariffs of this magnitude will have a negative impact for automotive manufacturers, and we are evaluating how we will take action accordingly. We remain hopeful that the sides can come to an agreement for a productive path forward.”

Several automotive executives and Wall Street analysts have described the tariffs as inserting unneeded chaos into the automotive industry.

“President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S., and if his administration can achieve that, it would be one of … the most signature accomplishments,” Ford CEO Jim Farley said in February during the Wolfe Research investor conference. “So far what we’re seeing is a lot of cost and a lot of chaos.”

Supporters of the tariffs have argued they are a way to help level trade disparities with the countries, while potentially serving as a leverage to renegotiate USMCA, which Trump originally negotiated during his first term as president.

Automakers have been relatively quiet about the financial impacts they expect from such tariffs, however GM CEO Mary Barra in February said the automaker believes it could mitigate short-term impacts of between 30% and 50% of additional costs “without deploying any capital.”

It’s difficult to calculate the total impact such tariffs will have on North American vehicle production.

“It’s one of the most fluid situations that the auto industry has ever really seen … on top of a few years of unexpected Covid situations, supply situations,” Brinley said. “The industry itself has developed to be a little bit more agile than maybe it was seven or eight years ago … but a lot of it is still very uncertain.”

The automotive industry is a complex global system that thrives on certainty. S&P Global Mobility reports there are on average 20,000 parts in a vehicle when it’s torn down to its nuts and bolts. Parts may originate in anywhere from 50 to 120 countries.

For example, the Ford F-150 is exclusively assembled in the U.S. but has roughly 2,700 main billable parts, which exclude many small pieces, according to Caresoft, an engineering benchmarking and consulting firm.

Those parts come from at least 24 different countries, according to Caresoft.