Perhaps for that reason, the Trump administration recently floated a plan to impose tariffs on imported cars. This decision will undeniably shape the emerging automotive landscape in North America. These tariffs will dramatically increase costs for Canadian and Mexican consumers purchasing vehicles. They will attempt to intimidate the construction of new auto plants in the United States. Automakers are stuck between a rock and a hard place as they drive headfirst into the possible consequences of these tariffs. As recently as last year, 61% of the 4 million cars produced in Mexico were exported to dealers in the U.S. This comes to show the deep linkages that exist between the North American auto industry.
The Alliance for Automotive Innovation is the automotive industry’s primary national trade association. They hope to see the tariffs positively influence American jobs from coast to coast. Last year, U.S. assembly plants made just 10.2 million cars and trucks. They exported almost 15% of that total, shipping close to 1 million vehicles to Canada and Mexico alone. In fact, the export value of U.S. auto parts to Mexico reached $35.8 billion last year. Conversely, exports to Canada totaled $28.4 billion. Even if successfully implemented, the tariffs will take many years to realize their intended effects. They would be able to reduce U.S. auto production by 10%-20%.
Impact on U.S. Auto Production
Extending tariffs to Canadian and Mexican auto parts would exacerbate these problems even further. This action could force a production cut of as much as 30%. It will be particularly difficult for U.S. suppliers that ship parts to Mexican and Canadian plants. This problem affects an industry that supports approximately 550,000 jobs—almost twice as many as in auto assembly plants. The integrated nature of the supply chain underscores just how broadly these tariffs could affect overall production—from the automotive sector and beyond.
Industry experts warn that a decrease in consumer purchasing power may lead to layoffs and reduced production time, ultimately affecting workers’ paychecks. It’s made more complicated here by the fact that U.S.-built cars going to Canada and Mexico count as an export.
“His tariffs are going to raise the prices of vehicles, slowing down the consumers purchasing of new vehicles, which will subsequently result in layoffs and less production time, affecting auto workers’ paychecks,” – John Hatline
Even with these caveats, the Trump administration refuses to concede that tariffs won’t be a net positive for U.S. jobs. President Donald Trump promises a lot of growth for the American auto industry. He estimates that each of the new auto plants will spawn six times as many new job openings.
Building New Auto Plants
The administration’s position is supported by some in the industry who predict a return of American manufacturing jobs.
“This is going to lead to the construction of a lot of plants, in this case auto plants,” – Donald Trump
“You’re going to see numbers like you haven’t seen… in terms of employment. You’re going to have a lot of people making a lot of cars,” – Donald Trump
Sean Fain believes that these tariffs could revitalize blue-collar auto jobs across America:
John Bozzella highlighted the challenges faced by the industry:
“With these tariffs, thousands of good-paying blue collar auto jobs could be brought back to working-class communities across the United States within a matter of months, simply by adding additional shifts or lines in a number of underutilized auto plants,” – Sean Fain
Challenges for Automakers
Supply chains are complex and international, so requiring an immediate change is totally unfeasible. This new complexity only complicates the nightmare automakers are dealing with these tariffs.
“We are committed to building and investing in the US, but these facilities and supply chains are massive and complex and can’t be relocated or redirected overnight,” – John Bozzella
The intricate and global nature of supply chains means that changes cannot happen overnight, adding to the challenges faced by automakers amid these tariffs.
Isaiah Goddard predicts upcoming announcements from major automakers:
“Get ready for Ford and the Big Three to announce more jobs and plants coming back to America soon,” – Isaiah Goddard
