Trade Showdown: The High Stakes of Auto Tariffs in North America
Examining the economic, political, and industrial impact of the 25% tariff on automobile imports and parts in North America
In case you missed it, here is a summary of the details behind the imposition of tariffs on the auto sector as of March 26, 20251.
Purpose of Action: President Donald J. Trump signed a proclamation on March 26, 2025, invoking Section 232 of the Trade Expansion Act of 1962 to impose a 25% tariff on imports of automobiles and certain automobile parts, aiming to counter trade practices that threaten U.S. national security.
Tariff Details: The 25% tariff applies to passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans), light trucks, and key automobile parts (engines, transmissions, powertrain parts, electrical components), effective April 3, 2025, for automobiles, with parts tariffs to follow by May 3, 2025.
USMCA Consideration: Imports under the United States-Mexico-Canada Agreement (USMCA) are tariff-free for compliant parts until a process is established to apply tariffs only to non-U.S. content, with penalties for inaccurate declarations.
National Security Focus: The action addresses the threat posed by excessive imports to America’s domestic industrial base and supply chains, critical for national security, as highlighted by vulnerabilities exposed during the COVID-19 pandemic.
Economic Impact: The tariffs aim to protect and strengthen the U.S. automotive sector, which has seen stagnation in production (11 million vehicles in 1985 vs. current levels) and a drop in R&D (16% of global spending in 2023 compared to 53% by the EU).
Evidence of Effectiveness: Studies from 2023 and 2024 indicate tariffs during Trump’s first term strengthened the U.S. economy, reduced imports from China, and spurred reshoring in industries like manufacturing and steel.
Implementation Process: The Secretary of Commerce will establish a process within 90 days to potentially expand tariffs to additional automobile parts if imports threaten national security, based on domestic producer requests or further findings.
Investor relations pages offer valuable insights into how global companies are shaping their future strategies. Reviewing conference call transcripts provides an accessible way to gather relevant and educational information. Below are some companies impacted by the auto tariff issue, along with relevant commentary.
Magna International Inc. (MG)
Company Overview
Magna International Inc. designs, engineers, and manufactures components, assemblies, systems, subsystems, and modules for original equipment manufacturers of vehicles and light trucks worldwide.
Tariff Comments
This is an industry wide issue that my personal opinion, I don't think the industry has the margin or the liquidity to absorb for an extended period of time.
We have a big Canadian footprint...So big picture, we have about 4 and a half billion of sales from Canada, from our plants. Of that 4 and a half billion, about 70% is shipped into the US. In Mexico, we have sales about 5 and a half billion and only about 25% of those sales are shipped into the US. Now all that being said, the way our contracts are structured is the customer in virtually all these situations is our customers pick up at our dock. And what that means is they're responsible for importing the product, carrying it over the border. So, the customer is responsible for paying tariffs in that situation. Our exposure to tariff is if we have a plant, let's say, in Michigan, and we're buying product from either Canada or Mexico and importing it.
one of our biggest programs is the one-ton truck, which is the GM's full-size vehicles, whether it's a truck or an SUV. And they're producing over a million of those vehicles.
Every single one of those vehicles requires a frame. Every single one of those frames are produced in either Canada or in Mexico, and these are 1,000,000 square foot facilities. And it's these decisions people are talking about, and the capital related to it is so significant…We're probably talking three years to relocate the product.
Linamar Corporation (LNR)
Company Overview
Linamar Corporation, together with its subsidiaries, design, develop, and produce engineered products in Canada, North America, Europe, and the Asia Pacific.
Tariff Comments
It's notable that the U.S. trade deficit with China, with EU, with Vietnam, Taiwan, Japan and South Korea all exceed the trade deficit of Canada with the U.S., some vastly, some by a factor of 2x to 5x that deficit with Canada.
I guess, is there an endgame in the auto industry? Is it about seeing more vehicle production, for instance, in the U.S.? Or is this just part of a strategy, a tactic around other areas that the U.S. administration would like to address when it comes to USMCA?
It isn't good for Canadians and it isn't good for Mexicans. And we can go forward together. I think that President Trump wants fair trade. I mean he said that, and he said that over and over again, right? Like he doesn't want to be treated unfairly. So let's understand what those things are and fix them. And then I think we may have an opportunity to go forward. And again, that may not necessarily be in the automotive industry because I frankly think that, that is a very well and very fairly traded area.
Martinrea International Inc. (MRE)
Company Overview
Martinrea International Inc. designs, develops, manufactures, and sells metal parts, assemblies and modules, fluid management systems, and aluminum products primarily to the automotive industry in North America, Europe, and internationally.
Tariff Comments
Well, it now appears that we are effectively into the negotiation process. Each participating country is reviewing the agreement, and we believe there will be intense negotiation of several aspects of the agreement. Regarding automotive, it will be a push for higher rules of origin by the United States, which could benefit suppliers such as ourselves. Despite much public speculation, we see a path to a modernization of the agreement to preserve and enhance the development of North America’s largest manufacturing industry.
Tariffs on autos and parts within North America hurt the industry and ultimately increase cost to consumers and are not in the interest in the United States, Canada or Mexico. We need to align. We will need to negotiate a new agreement, but there is opportunity.
I believe the tariffs, if fully implemented and not withdrawn, would cause the industry to shut down in a very short time. Some don’t seem to grasp this. If Tier 2 or Tier 3 suppliers don’t ship product or cannot afford tariffs to get product, the supply chain breaks down, and people don’t make cars.
The one thing that I will say that I think is likely to happen over the tariff negotiations within the USMCA and internationally is we are likely to see tariffs on other countries like Europe and Asia, which is going to make it more likely that those OEMs set up more production capacity in North America than they did before.
The tariffs under the USMCA are illegal. We have a three-party agreement. Tariffs are the purview of Congress, not the President. And at the end of the day, the use of an emergency power to say it’s Fentanyl is meant to justify the tariffs.
Ford Motor Company (F)
Company Overview
Ford Motor Company develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide.
Tariff Comments
If you look at the tariffs, let's be real honest, long term, a 25% tariff across the Mexico and Canadian border would blow a hole in the U. S. Industry that we have never seen. And it frankly gives free rein to South Korean and Japanese and European companies that are bringing 1,500,000 to 2,000,000 vehicles into the US that wouldn't be subject to those Mexican and Canadian tariffs. So, we would it would be one of the biggest windfalls for those companies ever. Meanwhile, we're USMCA compliant with almost all of our content, finished vehicles and components going across the borders to have that kind of size of a tariff would be devastating.
Gentex Corporation (GNTX)
Company Overview
Gentex Corporation designs, develops, manufactures, markets, and supplies digital vision, connected car, dimmable glass, and fire protection products in the United States, Germany, Japan, Mexico, and internationally. It operates through Automotive Products and Other segments.
Tariff Comments
There's obviously a lot of our customers build cars both in Canada and Mexico, and what impact would tariffs or threat of tariffs have on overall vehicle production in those countries. And so that one I think is going to cause a little bit of chaos here in the first half of the year, which is to be understood.
Aptiv PLC (APTV)
Company Overview
Aptiv PLC designs, manufacturers, and sells vehicle components worldwide. The company provides electrical, electronic, and safety technology solutions to the automotive and commercial vehicle markets.
Tariff Comments
And economically, other than moving out of Mexico to Central America, which we've done and will continue to do, moving that to North America, the reality from a labor standpoint only, labor cost standpoint only, tariffs would need to get north of 55% for the math to make sense on the labor differential. And that's not UAW labor, that's much lower cost than that. So, listen, we think this is about other things. We're taking it seriously. We're doing everything we can. We're coordinating with our customers. We're trying to support them in avoiding the tariffs. But if we end up impacted with 10%, 20%, 25% tariffs in out of Mexico into The U. S, our customers are going to have to pay for it.
Bayerische Motoren Werke Aktiengesellschaft (BMW)
Company Overview
Bayerische Motoren Werke Aktiengesellschaft, together with its subsidiaries, develops, manufactures, and sells automobiles and motorcycles, and spare parts and accessories worldwide.
Tariff Comments
The world is inextricably linked with one another even though the final products may or may not be produced locally. So tariffs, tariff discussions, you know, trade wars harm everyone. Now we do hope that soon everyone will notice that there's no winners in such a situation.
Opinion
High tariffs on the auto industry, if sustained, risk severe disruption rather than outright destruction. Industry leaders have warned that prolonged enforcement could devastate supply chains, causing widespread pain across the sector. While reductions or adjustments might occur, the current approach threatens significant damage.
The U.S. cannot immediately replace the massive volume of imported auto parts—$47 billion from Canada and $181 billion in vehicles and parts from Mexico in 2024. Establishing new facilities or retooling existing ones would demand years and billions in investment, making any shift gradual, not instant. Some manufacturing may return to the U.S., but trading partners will likely remain essential, as interdependence benefits all sides.
Negotiations could ease the strain. For example, parts meeting USMCA regional content rules (like 75% North American origin) might still qualify for exemptions if talks succeed. That’s the key—negotiations. Trump’s goal appears to be a new deal, and until that happens (possibly delayed until Canada elects a new government), uncertainty will continue to rattle the industry.
If these tariffs drag on for too long, job losses could hit the U.S. and North America broadly, while job creation shifts elsewhere globally.
The solution lies in negotiation—plain and simple!
Consider joining DiviStock Chronicles’ Referral Program for more neat rewards!Please refer to the details of the referral program.The White House. (2025, March). Fact sheet: President Donald J. Trump adjusts imports of automobiles and automobile parts into the United States. https://www.whitehouse.gov/fact-sheets/2025/03/fact-sheet-president-donald-j-trump-adjusts-imports-of-automobiles-and-automobile-parts-into-the-united-states/