- After declaring tariffs would go into effect this week, the Trump administration has now placed a 30-day hold on tariffs for goods that comply with the United States-Mexico-Canada Agreement (USMCA), including cars made by the Big Three domestic automakers.
- While the administration hopes the tariffs will incentivize automakers and suppliers to bring more production to the United States, industry analysts suggest that strategy may not work.
- A report cited by Automotive News suggests that many automotive parts suppliers would move production outside the U.S in the event of tariffs and, if the tax remains in effect for six months, could cut U.S. jobs.
The Trump administration has placed a 30-day moratorium on tariffs for USMCA-compliant goods coming from Canada and Mexico, which will end on April 2. The further delay raises questions as to how Ford, GM, and Stellantis will respond to the federal government’s goal of moving production to the United States, which some industry analysts think may not work.
A report by Automotive News shows that roughly one-third of U.S. auto parts suppliers said they would move production outside of the U.S. if 25 percent tariffs on Canada and Mexico stay in place for six months. The AN report cites a February survey conducted by MEMA Original Equipment Suppliers, a company that represents U.S. auto parts manufacturers.
In the study, more than 80 percent of American suppliers surveyed said tariffs on Mexico would negatively impact their business while more than two-thirds said the same about tariffs on Canada, according to AN. Nearly a quarter of surveyed suppliers said they would cut or delay investments if tariffs lasted just a month. If the tariffs were to last for six months, nearly half of the surveyed suppliers said, they would cut U.S. jobs.
Given the short time frame offered by the new moratorium and the huge amounts of capital needed to move production, don’t expect to see the automakers taking concrete steps on that one in the next few weeks. However, we can expect some to make announcements about their investments in the U.S., said Sam Abuelsamid, an analyst for the Telemetry market-research firm.
Abuelsamid pointed to an investment plan outlined by Apple in 2021 that included a $5 billion data center in North Carolina. “Most of that money was already planned for the normal course of business anyway and would have been spent regardless,” said Abuelsamid.
The playbook will likely be the same for automakers whose business outlook tends to be years down the road, rather than weeks or months. MEMA president Collin Shaw expressed similar sentiments to AN, saying it would be “categorically false” to suggest automakers could move production in a matter of months. “It’s a multiyear journey, at least two years to move production from location to location,” Shaw said.
Car and Driver reached out to Ford, General Motors, and Stellantis for comment on the exemption and we have listed their responses below.
GM’s statement on the exemption:
“We thank President Trump for his approach, which enables American automakers like GM to compete and invest domestically. With more vehicle assembly plants in the U.S. than any other automaker, GM has invested over $60 billion since the USMCA took effect, and we continue to invest billions of dollars every year in our manufacturing base, supply chain, and U.S. jobs. We are committed to continued growth and delivering winning vehicles to American consumers.”
Ford’s statement:
“As America’s top auto producer, we appreciate President Trump’s work to support our industry and exempt auto companies complying with USMCA. Since President Trump’s successful USMCA was signed, Ford has invested billions in the United States and committed to billions more in the future to both invest in American workers and ensure all of our vehicles comply with USMCA. We will continue to have a healthy and candid dialogue with the Administration to help achieve a bright future for our industry and U.S. manufacturing.”
Stellantis’s statement:
“We thank President Trump for the decision to grant a one-month exemption from tariffs to USMCA-compliant products. We strongly support his determination to enable the American automotive sector to thrive, and in the first 100 hours of his new Administration we announced major investments to grow our business in America. Since the USMCA was enacted in his first term, we invested billions in our U.S. activities and U.S. suppliers. We share the President’s objective to build more American cars and create lasting American jobs. We look forward to working with him and his team.”
Jack Fitzgerald’s love for cars stems from his as yet unshakable addiction to Formula 1.
After a brief stint as a detailer for a local dealership group in college, he knew he needed a more permanent way to drive all the new cars he couldn’t afford and decided to pursue a career in auto writing. By hounding his college professors at the University of Wisconsin-Milwaukee, he was able to travel Wisconsin seeking out stories in the auto world before landing his dream job at Car and Driver. His new goal is to delay the inevitable demise of his 2010 Volkswagen Golf.
Source: Motor - aranddriver.com
