The Import and Export Taxes of the U.S. Car Industry: Implications for Automakers and Manufacturing in the United States

The US will negotiate with Mexico with the help of Secretary of State Marco ulro, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, according to Trump.

“I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a ‘deal’ between our countries,” he said on social media.

Over the weekend, Trump had said that a 25% import tax on goods from Mexico and Canada, alongside 10% tariffs on goods from China, would go into effect on Tuesday. Trump said he will be speaking to Canadian Prime Minister Justin Trudeau Monday afternoon.

In the long run, tariffs would raise the costs of cars imported from Mexico, like the Toyota Tacoma or the Chrysler Pacifica. It would raise the price of cars assembled in the U.S. because many of their parts are from companies in Canada or Mexico. It is possible to send a wire from the U.S. to Mexico for installation into a group of wires, and then back to the U.S. for installation into a bigger piece of a car.

General Motors is the US car company that is the largest exporter in Mexico. Mexico is the No. 1 provider of cars and car parts for the United States. One out of every three refrigerators in the U.S. come from Mexico, as well as the largest provider of TV and computer screens.

Canada and Mexico are crucial trade partners. The auto industry, in particular, has been watching anxiously for updates. Carmakers have built a vast, complicated supply chain that spans North America, with parts crossing back and forth across borders throughout the auto manufacturing process.

Bernstein Research estimates that 25 percent of the tariffs on both countries will hurt the Detroit 3 disproportionately. According to analysts at Jeffries, the average price of a car in the US will increase by about $6,000 if they add 6%.

“We urge all parties to reach a swift resolution in order to provide clarity and stability for the entire U.S. auto industry,” said the president and CEO of Autos Drive America. The Alliance for automotive innovation saidseamless trade in North America supports a $300 billion auto industry.

In a memo on January 31, MEMA stated that the tariffs would have “severe consequences” for suppliers, workers and consumers.

He told reporters on Monday that the U.S. isn’t dependent on Canada if tariffs are imposed. “We don’t need them to make our cars,” he said.

One significant challenge for automakers — and their surrounding ecosystem of suppliers, dealers and repair shops — is Trump has always said these particular tariffs are meant to motivate policy changes, and are not intended to be permanent. It’s different from the tariffs on China which are meant to help the U.S. companies compete with subsidized Chinese rivals, or the larger tariffs that the federal government might want to impose.