Tariffs on Canadian and Mexican imports are looming again. And that could quickly send car prices soaring, even for those assembled in the United States.
That’s because the auto industry has spent decades operating as if all of North America is a single market, moving cars, parts, and vehicles freely across the borders of the three countries. As a result, there isn’t such thing as an all-American car built with parts made solely in the United States.
President Donald Trump said this week that tariffs of 25% on the value of all imports from Mexico and imports other than energy products from Canada will take effect Tuesday. The last time Trump announced these tariffs, he quickly reversed course and delayed them from taking effect for a month. But unless there’s another delay or the threat of tariffs is completely dropped, the auto industry — and car prices — are set to experience a seismic shock.
“There’s probably not a vehicle on the market today that wouldn’t be affected in some form or fashion by tariffs,” Peter Nagle, automotive economist for S&P Global Mobility, told CNN. “I would think prices would start to change in the one-to-two weeks after the tariffs go into effect.”
The US government tracks the percentage of each car’s parts made “domestically.” But under current trade law, Canadian and US-made parts are counted as effectively coming from one country. Even with the broader definition of “American made,” none exceed 75%.
There are only two vehicles that are considered to be 75% “American-made” by the US government — the Tesla Model 3 and the Honda Ridgeline, a pickup assembled at a Honda plant in Lincoln, Alabama. And once again, that 75% figure includes parts from Canada.
Almost all of the vehicles that have 50% or more of their parts from American or Canadian suppliers are either built by Tesla or brands that are ostensibly “foreign,” but assembled in the United States — Honda, Hyundai, Kia, Nissan, Mazda, Subaru, and Toyota.
The Ford F-150, the most popular vehicle in the United States for more than 40 years, has the most domestically produced parts of any vehicle made by one of Detroit’s three automakers. While all the parts are assembled into a pickup truck in either Michigan or Missouri, only 45% of those parts come from American or Canadian factories. Many of the larger versions of its engines come from Mexico.
“Yes, it’s America’s truck, assembled in America, but not with American parts,” Ivan Drury, director of insights for automotive site Edmunds, told CNN.
That means in addition to the tariffs scheduled to go into effect on cars assembled at Canadian or Mexican plants — even the ones assembled in the United States — will also soar by thousands of dollars each. And those costs are expected to be quickly passed onto consumers. These vehicles include the Chrysler Pacifica and some Chevrolet Silverados, which are assembled at Canadian plants, and the Ford Mustang Mach-E and Honda HR-V, which are assembled at Mexican plants.
“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the US industry that we’ve never seen,” Ford CEO Jim Farley said in comments to investors in February.
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