In a worst-case scenario, U.S. and European automakers could lose up to 17% of their combined annual core profits if the U.S. imposes high tariffs on Mexico and Canada, two of the U.S.'s main allies. Yes, according to a report released by S&P Global on Friday.
The report comes as President-elect Trump threatens to impose a 25% tariff on all products from Canada and Mexico and increase tariffs on China.
U.S. automakers import billions of dollars of parts and products from Mexico, where many companies operate factories that work closely with U.S. automakers. Tariffs on these products could cause U.S. auto prices to skyrocket, after years of staggering increases following the pandemic.
“Donald Trump's re-election is likely to intensify the already challenging headwinds facing the global auto industry in 2025,” the report warned.
Premium original equipment manufacturers such as Volvo and Jaguar Land Rover may be at increased risk of higher tariffs due to their reliance on European production, the report said. General Motors and Stellantis are also likely to be exposed to higher tariffs because they rely on production in Mexico and Canada, the report said.
The companies could have more than 20% of their profits before interest, taxes, depreciation and amortization at risk by 2025, the report said.
Meanwhile, Volkswagen and Toyota's exposure is less high risk at 10-20 percent, while BMW, Ford, Mercedes-Benz and Hyundai's exposure is less than 10 percent, the report added.
President Trump's tariff plans, a favorite tool for boosting U.S. manufacturing and imposing more favorable trade terms on other countries, have faced pushback from both Mexico and Canada, key U.S. allies. I am doing it. Canada also cracks down on border with US
Mexican President Claudia Sheinbaum has warned that if talks between the United States and Mexico fail, her country will respond with its own tariffs. The prime minister said on Tuesday that talks were “the best path to achieving understanding, peace and prosperity for both countries.”
Canada's top economic officials also warned Trump not to disrupt the “balanced and mutually beneficial” relationship between the United States and Canada, noting how much Canada imports from the United States.
