Tariffs imposed by the US to Mexico are going to shoot many prices. Those of these car brands are going to be a problem

The United States decision of Implement 25% tariffs On the imports of Mexico and Canada it will have many and varied consequences, but there is a sector that will be specially affected by it: the automotive industry, especially from North America. After several postponements, the measure entered into force on March 4without the possibility of a new negotiation. There are already names of affected companies and models.

An interconnected industry. Throughout the last three decades in the United States, with The signature of the NAFTA (Gasoline) in 1994 and its subsequent evolution towards the T-MEC (USMCA), car manufacturers have developed supply chains highly interdependentin which engines, transmissions and other components cross the borders multiple times before assembling in a final vehicle.

The premise behind this model is clear: take advantage of the economic and logistics strengths of each country to reduce costs, improve efficiency and offer more competitive prices to its consumers. However, new tariffs could break this structure, drastically more expensive and generating uncertainty about what cars will be considered imported or national.

What is really an imported car. It had the New York Times. Before talking about the repercussions, it should be explained how a vehicle is “mounted”. The central problem of tariffs is that defining what an imported car is is not so simple. In legal terms (and USA key), a vehicle is classified as imported when its final assembly occurs outside the United States. However, the complexity of supply chains This definition has become obsolete.

The medium exposed concrete examples of this interconnection. Namely: the Chevrolet Blazer is assembled in Mexico, but uses engines and transmissions made in the United States, the Nissan Altim He assembles in the United States but with only 25% of its American parts (the engine comes from Japan and the transmission of Mexico).

Extra ball. There is another problem: that the Trump administration has not specified How will you apply tariffs To these components that cross the border several times. This, no doubt, generates a climate of uncertainty for manufacturers, who do not know how to calculate production costs and define their commercial strategy. A true chaos.

Affected companies and models. What seems clearly clear is that, if tariffs are permanently implemented, a summary of Several companies that could be forced to reconsider investments or even transfer production to other regions. Who is it? The main automotive with operations in Mexico and Canada that They would be impacted For tariffs they include:

• BMW: Its plant in San Luis Potosí, Mexico, produces series 3, 2 Coupé and M2 models, mainly intended for the US and global market.
• Ford: operates three floors in Mexico and exported almost 196,000 vehicles to North America in the first half of 2024, of which 90% went to the United States.
• General Motors (GM): It imported around 750,000 vehicles from Mexico and Canada in 2024, including key models such as Chevy Silverado, GMC Sierra and SUV medium. In addition, its Mexican plants assemble two of its new electric vehicles (EVS).
• Honda: with 80% of its Mexican production for the United States, it already warned that it could rethink its manufacturing strategy if tariffs become permanent.
• KIA: Its factory in Mexico assembles its own models and the Santa Fe SUV for Hyundai, which are also exported to the United States.
• Mazda: exported 120,000 vehicles from Mexico to the United States in 2024 and evaluates to stop future investments if tariffs enter into force.
• Nissan: Its two plants in Mexico produce the Sentra, Versa and Kicks models for the United States, with a total of 505,000 units assembled in the first nine months of 2024.
• Stellantis: Assemble in Mexico the RAM, Vans and Jeep Compass trucks, in addition to manufacturing Chrysler models in Canada. In 2025, he plans to restart the production of a new Jeep model in his Canadian plant.
• TOYOTA: Produces Tacoma in its factories in Mexico, with more than 230,000 units sold in the United States in 2024, which represented 10% of its sales in that market.
• Volkswagen (VW): Its plant in Puebla, Mexico, manufactured about 350,000 vehicles in 2024, including the Jetta, Tiguan and Taos, all for export to the United States.
• Audi: His factory in San José Chiapa, Mexico, produces the Q5 and uses more than 5,000 people. Only in the first half of 2024, exported almost 40,000 units to the United States.
• Plus: In Canada, Volkswagen is building a battery gigafabrica in Ontario, which will begin production in 2027, a project that, obviously, could also be affected by commercial uncertainty.

Possible consequences. The first is the most obvious and we can Explain with an example: If a car manufactured in Mexico has a base price of $ 25,000, a 25% tariff would add 6,250 to the final cost. In the market, the impact would be enormous: the car would be less competitive in front of the United States automotive industry and generate a tension in the commercial relations of both countries, since Mexico would begin to look to other sides. But there is more.

First of all, Price increase For consumers in the United States. Additional costs could be transferred to customers, making cars, trucks and SUVs assembled in Mexico and Canada. The reduction of competitiveness is also pointed out, since brands such as Ford, GM, Toyota and VW could lose market participation against production manufacturers in the United States or outside North America.

Plus: the Reconfiguration of the supply chainsince some companies could seek to transfer operations outside of Mexico or Canada to avoid tariffs, although this would imply high costs and prolonged deadlines. Finally, analysts also point to Impact on employment and investmentsince automotive plants in Mexico and Canada generate hundreds of thousands of jobs. Uncertainty about tariffs could cause investment reduction, mass layoffs and lower expansion of the sector in the region.

How much prices will increase. It is the big question. Manufacturers have analyzed the direct impact of tariffs on production costs. According to Patrick Andersonfrom Anderson Economic Group, additional costs per unit will range Between $ 4,000 and $ 10,000 by vehicle, depending on the model and the import level of affected components.

Given this situation, as we said, manufacturers They would have three options. Absorb the cost, reducing your gain margins. Relocating part of production in the United States, which is expensive and would take years. Or the one that many fear: transfer the cost to consumers, increasing vehicle prices. Plus: This is especially problematic at a time where the average price of a new car in the United States It is already $ 48,000a level that has left many consumers outside the market.

Thus, and despite the efforts to promote assembly within the United States, the reality is that the country does not have the infrastructure to produce all automotive components. Since 1999, national production has fluctuated, exceeding 12 million per year at its best, but with significant falls after the 2008-2009 crisis and the pandemic. Without a clear policy about what is considered an imported car and how tariffs will be applied to the individual parties, the measure could destabilize the automotive sector and harm both companies and their local workers and final consumers.

Image | Department forFlickr/ Spenceyc

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