Tariffs implemented by the Trump administration are leading the auto industry into uncertainty that may lead to a year of higher prices and production cutbacks, an analyst for S&P Global Mobility said Tuesday.
“It’s one of most fluid situations the auto industry has ever seen,” S&P Global Mobility’s Stephanie Brinley said on a webinar conducted by the Automotive Press Association.
“A lot of it is very uncertain,” she added. “We’re in for a bumpy 2025.”
President Donald Trump on Feb. 1 implemented tariffs of 25% on Canadian and Mexican goods. Two days later, he paused the tariffs for 30 days.
When that period expired, the administration put the tariffs into effect. Canada and Mexico “have failed to adequately address” drug trafficking, the White House said in a statement. Trump also is levying tariffs of 20% on Chinese products.
In North America, vehicles and parts are shipped across borders, often multiple times. Tariffs on Canada and Mexico will be levied throughout the production process.
That has the potential to boost vehicle prices by $4,000 to $10,000, consultant Patrick Anderson said during a Feb. 21 webinar by the Automotive Press Association. Other estimates of the impact of tariffs run as high as $12,000, according to Bloomberg.
Brinley during her presentation didn’t make specific price estimates. She expects much of the additional cost to be passed onto consumers. Auto suppliers “are not in a position to absorb a lot of cost,” she said.
Discounts for vehicles will be cut back, Brinley added. “We will probably see incentives go away,” she said.
The analyst handicapped how long the new tariffs will remain in place.
S&P Global Mobility estimates there’s a 70% probability the Canadian and Mexican tariffs last two weeks or less; a 20% chance they last six to 8 weeks; and 10% they become permanent.
The firm says about 63,900 light vehicles are produced daily in North America. Automakers may reduce daily output by about 20,000 vehicles because of the tariffs, Brinley said.
The impact of tariffs will be widespread, the analyst added. General Motors Co., Ford Motor Co., Stellantis, Toyota Motor Corp., Honda Motor Co. and Volkswagen AG have factories in Canada and Mexico.
“There is not a vehicle that is produced” that’s not affected by the tariffs, she added.
Over time, automakers and their suppliers may change their supply chains to avoid all the border crossing, Brinley said. But that will take years and be expensive, she said.
Separately, the Detroit-based United Auto Workers union sounded support for the tariffs.
“For 40 years, we’ve seen the devastating effects of so-called ‘free trade’ on the working class,” the UAW said in a statement. “Corporations have been driving a non-stop race to the bottom by killing good blue-collar jobs in America to go exploit some poor worker in another country by paying poverty wages. Tariffs are a powerful tool in the toolbox for undoing the injustice of anti-worker trade deals.”
The union opposed Trump’s 2024 campaign. But the union was on Trump’s side on Tuesday.
“We are glad to see an American president take aggressive action on ending the free trade disaster that has dropped like a bomb on the working class,” the UAW said in the statement.
