Feature Image Source: Automotive News
Disclaimer:
The information provided by Dirt Legal is for general informational purposes only and does not constitute legal or financial advice. Please consult your CPA or attorney for guidance on all financial and legal matters.
A 25% tariff on nearly all goods imported into the U.S. from Canada and Mexico could shut down assembly and parts plants across all three countries within a week. With the industry's tight margins, keeping production running would become unsustainable, Automotive News said.
Overturning decades of free trade across North America, the measure will take effect Feb. 4., U.S. President Donald Trump said on Feb. 1.
Nearly 90% of auto exports from Mexico and Canada are sent to the U.S., according to the Mexican Automotive Manufacturers' Association (AMIA) and the Canadian Vehicle Manufacturers' Association.
Tariffs targeting Canada’s auto sector will also have a direct impact on auto-producing states, from Michigan to Alabama and Georgia to California, according to Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association.
“The dominoes will fall as the quick debates happen on who is going to absorb the 25 percent,” Volpe said.
According to Automotive News, automakers could resort to stopping their lines within one week, further guiding Tier 1, 2, and 3 suppliers to quickly dry up, said David Adams, CEO of Global Automakers of Canada.
German automakers have expressed concern regarding the tariffs, with Volkswagen Group being the hardest hit. They said this will cause inflation for consumers, Reuters News said.
Automakers in Canada were working on a plan throughout January that included importing a vast majority of finished vehicles to the U.S. in order to build inventory prior to the decision, Adams said.
Reactions to Trump tariffs from executives, experts, and political leaders
The tariffs will implement “immediate negative impacts to jobs and consumers,” Adams added, and called for the surtax to be withdrawn “as quickly as possible.”
The tariffs infringe upon the United States-Mexico-Canada Agreement finalized in 2019 and could potentially lead to the closure of auto plants in the United States, Prime Minister Justin Trudeau said.
Canada's retaliation includes 25 percent tariffs on $30 billion in U.S. imports starting February 4 and additional tariffs on $125 billion in imports in three weeks., Automotive News said.