President Donald Trump’s early tariff moves have left the auto industry fearing a significant cost burden, with Ford CEO Jim Farley warning that tariffs could “blow a hole” in the US industry. The threat is not limited by geographical region, as national tariffs (Canada, Mexico) and material tariffs (steel, aluminum) pose the same risk of making cars more expensive for consumers.
The auto industry has already faced significant costs due to existing tariffs, with most US automakers selling cars that cross borders multiple times during the assembly process. Additional tariffs on steel and aluminum would further exacerbate the problem. Ford’s CEO Farley stated at a Wolfe Research conference that a 25% tariff across the Mexico-Canada border would have devastating effects, giving free rein to South Korean and Japanese companies that could bring in millions of vehicles without tariffs.
Industry executives acknowledge the need to mitigate costs, with GM reducing inventory in international plants. However, even these measures may not be enough to offset the impact of tariffs. The Anderson Economic Group warned that additional tariffs would create a “triple-whammy” for the auto industry, affecting Michigan, Ohio, Indiana, and Ontario, as well as Tennessee, South Carolina, Alabama, and Texas.
While some argue that tariffs are a negotiating tactic, others hope Trump will spare the auto industry or its key trading partners. Ford’s CEO Farley expressed his hopes for relief from policy uncertainty, stating that he needs a “pony in here” to help the industry. The stakes are high, with US car companies facing an existential threat from lower-cost Chinese manufacturers.
The revocation of Trump’s EV mandate has provided some respite, but it may also limit the ability of automakers to compete globally with Chinese rivals. With the rise of cheaper Chinese imports, US auto companies risk becoming increasingly expensive compared to foreign alternatives. The US auto industry could potentially shut down within a week due to tariffs, and no company is set up to operate in a world with high-friction border duties.
Source: https://www.axios.com/2025/02/12/trump-auto-tariffs