DETROIT - US President Donald Trump’s 25% tariffs on Canada and Mexico have sent the US auto industry scrambling to plan for the massive tax on some of America’s best-selling vehicles, including full-sized pickup trucks, while pinning their hopes on a potential deal in Washington.
Hours after the tariffs went into effect, the White House threw the industry a lifeline, saying many North American-built vehicles would be exempt if they already followed the complex rules of origin under the 2020 US-Mexico-Canada Agreement (USMCA), enacted during Trump’s first term.
“We are going to give a one-month exemption on any autos coming through USMCA … so they are not at a disadvantage,” White House press secretary Karoline Leavitt told reporters Wednesday. “Reciprocal tariffs will still go into effect on April 2.”
Trump raised the idea of a 30-day pause on USMCA-compliant vehicles in return for expanding production in the US during a call on Tuesday with General Motors CEO Mary Barra, Ford CEO Jim Farley, Ford executive chairman Bill Ford Jr and Stellantis chairman John Elkann, Reuters reported earlier.
Automakers have expressed support for boosting US investment but want certainty over tariff policies as well as vehicle emissions rules before making dramatic changes, two industry sources said.
Such a deal could be an especially welcome development for pickup-truck makers — and for their leading customers, who lean heavily towards Trump’s rural base of Republican voters.
About one-third of pickups sold by American and foreign brands in the United States are manufactured in Mexico and Canada, according to the research from Global Data.
The quintessentially American product is the backbone of the US car industry, providing large portions of the sales and profits for GM, Ford and Stellantis, owner of the Jeep and Ram truck brands. Automakers, including US and foreign brands, sold nearly 3 million US pickups last year, about 20% of overall national sales.
And pickup drivers are about twice as likely to say they are Republicans than Democrats, according to an August survey by Edmunds, an industry information provider.
The tariff pause gives the industry additional breathing room to hold consumer prices steady because of existing inventory on dealer lots. Ohio dealer Rhett Ricart, who sells GM and Ford vehicles among other brands, held out hope for a quick deal to avert a crisis.
“I think it won’t take a month for them to figure out how to handle this thing,” he said, speaking before Wednesday’s announcement. “I’ll be more concerned … 30 days from now.”
‘No choice’ but to pass on costs
Trump’s tariff threats have had automakers and suppliers gaming out how they might avoid or absorb such taxes — and how much they might have to raise consumer prices. The answers to such vexing questions could vary widely by automaker, depending on their and their suppliers’ exposure to Canada and Mexico manufacturing.
Analysts at Wolfe Research projected the tariffs would add about $3,000 on average to the cost of a vehicle, and around $7,000 on models imported from Canada or Mexico. Full-size pickups have an average transaction price of about $65,000, according to data from Cox Automotive.
“Once the manufacturer starts passing on that cost to us, we’re going to have no choice but to pass it on” to consumers, said Jeff Tamaroff, chairman of Tamaroff Auto Group, which owns Honda and Nissan dealerships in Michigan.
Those extra costs would come in addition to already-soaring vehicle prices, which started to rise sharply during the coronavirus pandemic and haven’t eased much since. The average vehicle sales price hit $48,641 in January, according to Cox Automotive.
No all-American cars
Among the Detroit brands, GM’s Chevrolet and GMC pickups, along with Stellantis’s Ram, are more exposed to Trump’s taxes than Ford because both build large numbers of pickups in Mexico.
Ford builds its F-series pickups in the United States — but also makes some truck engines in Canada, underscoring the intricate web of economic interdependence among the three North American trading partners.
Almost no American vehicle is made from solely American parts, industry research shows.
Barclays bank analysts estimate that Mexico provides up to 40% of the parts in US vehicles and Canada more than 20%. Suppliers say they will have to cover some of the tariff costs and will likely see an additional hit if consumer demand weakens from rising vehicle prices.
Automakers and suppliers also worry about the effects of tariffs on vehicle components that bounce across borders before reaching their final destination. Companies worry that such parts could be taxed with every border crossing, although Trump has not clarified his policy in such cases.
US automakers and their suppliers have invested billions to expand their US footprint and avoid tariffs since the Trump administration enacted the USMCA in 2020 to replace the 1994 North American Free Trade Agreement.
Now, some industry executives say they’re being punished for complying with Trump’s signature trade deal.
“This is a bonanza for our import competitors,” Ford CEO Jim Farley told analysts last month of Trump’s new tariff threats, pointing out that some rivals import from Asian countries with few duties.
