GM and other US automakers would be hit hard by Trump's tariffs

Trump's tariffs could increase prices of SUVs and pickup trucks for American consumers. Tariffs seen by some analysts as a negotiating tactic linked to immigration and drug issues. Mexican President Sheinbaum warns tariffs could worsen inflation and kill jobs MEXICO CITY/DETROIT, Nov 26 (Reuters) – U.S. President-elect Donald Trump's plan to impose a 25% tax on all imports from Mexico and Canada could hurt the financial results of U.S. automakers, particularly General Motors. (GM.N), opens a new tab and raises SUV and pickup prices for U.S. consumers.

GM is the leading automaker exporting cars from Mexico to North America. The ten largest automakers with Mexican factories collectively built 1.4 million vehicles in the first six months of this year, 90% of which crossed the border to be purchased by U.S. buyers, according to the Mexican Automobile Association. automobile trade.

Other Detroit automakers will likely feel the pain, too: Ford (FN) opens in a new tab and Stellantis (STLAM.MI) opens in a new tab are the top U.S. producers in Mexico after GM, whose shares fell Tuesday, the day after Trump's tariffs. announcement.

GM is expected to import more than 750,000 vehicles from Canada or Mexico this year, with most manufactured south of the border, according to trade analytics firm GlobalData.

They include some of GM's most popular vehicles, including nearly 370,000 Chevrolet Silverado or GMC Sierra full-size pickup trucks and nearly 390,000 mid-size SUVs.

GM's Mexican plants are also building two of its essential new electric vehicles, battery-powered versions of its Equinox and Blazer SUVs. These and other GM models are already in the crosshairs of another expected Trump policy: ending a $7,500 subsidy for electric vehicles, a move first reported by Reuters.

GM, Stellantis and Ford declined to comment on Trump's proposed tariffs.

Kenneth Smith Ramos, Mexico's former chief negotiator for the USMCA trade deal, said the move could hurt the United States as much as its North American trading partners.

“The United States would be shooting itself in the foot,” he said. The impact on the Mexican automobile industry would also be “very negative”.

GM employs 125,000 people in North America; a decline in sales of its Mexican-made cars could hurt its profits across the region, potentially putting pressure on payrolls on both sides of the border.

The tariff hikes would also serve as a reminder of supply chains, which closely bind the three members of the United States-Mexico-Canada Agreement. Mexico and Canada account for more than 50% of all auto parts exported to the United States, accounting for nearly $100 billion worth of parts. Imposing these tariffs would increase the costs of all vehicles assembled in the United States.

TARIFFS, DRUGS AND IMMIGRATION

The sweeping impact of Trump's threatened tariff measures on Mexico and Canada raises questions about what the new administration is trying to accomplish economically and the potential collateral damage to U.S. businesses and consumers.

Trump framed the action as punishment for the unrelated problems of immigration and fentanyl trafficking, posting on social media that the tariffs would remain in place until Mexico and Canada put an end to what he called an invasion of illegal aliens.

The reference to drugs and migration has led some analysts to predict that the tariffs are more of a negotiating tactic than a real policy proposal.

“Given that the (social media) post explicitly references the flow of people and drugs across the southern and northern borders, it suggests that this specific tariff threat is more of a negotiating tool than a means of generating revenue,” said Thomas Ryan, North America. economist at Capital Economics.

“This leaves the door open for Canada and Mexico to develop a credible plan over the next two months to try to avoid these tariffs,” he added.

Mexican President Claudia Sheinbaum called for dialogue with Trump and warned that the proposed tariffs lacked “sense” and would worsen inflation and kill jobs in both countries. She also raised the specter of retaliation, although given its vast flow of exports to the United States, the Mexican economy remains more vulnerable to tariff threats. Trump's import taxes could also theoretically prevent Chinese automakers from using Mexico as a way to circumvent high U.S. tariffs on Chinese electric vehicles. , but these imports are already effectively blocked by other US trade barriers.

GM shares were down 8.2% Tuesday afternoon, while Stellantis shares fell 5.5% and Ford shares fell 2.6%.

This chart shows the number of cars exported to North America from Mexico by automaker from January to July 2024.

Free trade with the United States, first in the form of NAFTA and later in the USMCA, transformed Mexico's nascent auto industry into the country's largest manufacturing sector and illustration of its export prowess. But 30 years after NAFTA was created, Trump has put all of that on the line.

In the hyper-competitive world of car and truck production, a 25% tariff could bring down a Mexican industry that has spent years integrating closely with the United States, the destination of nearly 80%. of all vehicles manufactured in Mexico.

Higher tariffs would also hit U.S. consumers. Even if the company importing goods into the United States pays the customs duties directly, this cost is inevitably passed on to the consumer through higher prices.

“That's how tariffs work. Even though the (Trump) administration might want to make it look like Mexico is paying…ultimately the consumer will bear that,” said Sudeep Suman, managing partner at the firm consultancy AlixPartners.

This could affect many popular vans in rural parts of the United States who voted overwhelmingly for Trump. Notably, the Toyota Tacoma, Ford Maverick, Ram from Stellantis and Chevrolet Silverado and GMC Sierra from GM are all made in Mexico.

GM may be able to absorb some costs related to its highly profitable pickup trucks, but other manufacturers selling less expensive vehicles like the Nissan Sentra may have trouble continuing to build profitable models, said Sam Fiorani, an industry analyst. at AutoForecast Solutions.

Someone will have to bear that cost and it will come back to the manufacturer or the customer, Fiorani said. All vehicles sold in the United States would be more expensive or significantly less profitable.

Tariffs could also affect the cost of producing vehicles in the United States, as many parts now come from Mexico. The Latin American country accounts for 43% of all U.S. auto parts imports, more than any other country.

Francisco Gonzales, director of Mexico's national auto parts industry, said regional cooperation across North America reduces costs for customers.

Automakers “can’t produce everything in one country,” he said, “because that makes them uncompetitive.”

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Reporting by Cassandra Garrison in Mexico, Ben Klayman in Detroit and David Shepardson in Washington Writing by Brian Thevenot and Stephen Eisenhammer Editing by Christian Plumb and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles., opens a new tab

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Journalist based in Mexico who focuses on climate change and businesses in the telecommunications sector. Previously based in Santiago de Chile and Buenos Aires, he covered the Argentine debt crisis, the struggle for influence between the United States and China in Latin America and the coronavirus pandemic.

He is Detroit bureau chief and North America transportation editor, responsible for a team of about 10 reporters covering everything from autos and aerospace to airlines and space.

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