Vehicles bound for export in Ulsan, South Korea. (SeongJoon Cho/Bloomberg News)
Just hours after taking effect, President Donald Trump’s 25% tariffs on imported cars were already reverberating around the globe.
Jeep maker Stellantis NV plans to temporarily halt some production in Canada and Mexico. Ford Motor Co. began offering steep discounts to keep customers coming to showrooms and General Motors Co. plans to boost U.S. pickup truck output. Volkswagen AG warned dealers that it will tack on import fees to the vehicles it ships to the U.S., while Toyota Motor Corp. is cutting overtime at a factory in Mexico.
The levies, part of a broader trade war, are expected to upend supply chains and add thousands of dollars in costs to most vehicle models.
Canada responded with plans to slap a 25% retaliatory duty on U.S.-made vehicles, Prime Minister Mark Carney announced April 3.
Carney
The implementation came shortly after Trump said the U.S. would impose a 10% tariff on every country that exports to the U.S., plus additional duties targeting about 60 nations. Although imported cars and parts are exempt from those so-called reciprocal tariffs, carmakers are already reeling from Trump’s escalating trade war.
“While the sector may feel it just dodged a bullet, we remain concerned that vehicle and parts tariffs are here to stay and will add a substantial cost burden,” Bernstein analyst Daniel Roeska said in a note to clients. Certain auto parts will also be hit by a levy no later than May 3 under a plan Trump announced last week.
The U.S. will also keep existing 25% tariffs on Canada and Mexico, and an exemption for goods that comply with the U.S.-Mexico-Canada Agreement between the countries will remain indefinitely, officials said. Those levies were initially imposed to urge action to curb the flow of fentanyl. The countries would switch to the new tariff regime if those initial levies are lifted, officials said.
Buyers Rush In
Car buyers have been rushing to U.S. showrooms to lock in deals before potential price hikes from the levies. That drove March sales to an annual rate of about 17.8 million vehicles, the most since April 2021, according to JPMorgan Chase & Co. analyst Ryan Brinkman.
But as that supply runs out, automakers are bracing for significant potential cost increases and supply chain turmoil.
Auto executives continue to lobby the administration to limit the fallout, with Ford, GM and Stellantis focusing their efforts on excluding certain low-cost car components from the tariffs.
On April 3, timed with the new tariffs, Ford said it was rolling out discounts on nearly its entire lineup as a way to keep car buyers coming into its showrooms.
Trump
Ford’s “From America, For America” discount program, which runs through June 2 and offers an employee-pricing-for-everyone deal, is reminiscent of the “Keep America Rolling” 0% financing promotion GM offered after the terrorist attacks of September 11, 2001, which jump-started U.S. auto sales in a bleak economy.
Industry executives have said that they support Trump’s goal of building more vehicles in the U.S. and expanding the country’s manufacturing base. But moving auto assembly plants will likely take years, and may never happen for cash-strapped parts suppliers.
GM on April 3 said that it will add as many as 250 new jobs to build pickup trucks at its plant in Fort Wayne, Ind., where the company is speeding up its assembly lines to add production. The company will also convert about 200 part-time temporary workers to full-time temp roles at the plant, which makes the Chevrolet Silverado and GMC Sierra full-size pickups.
Canada, Mexico
Stellantis, which owns brands including Ram and Chrysler, said it will pause production at its Windsor, Ontario, plant for two weeks beginning April 7, citing uncertainty around tariffs. The company will also idle its Jeep plant in Toluca, Mexico, that makes the entry-level Compass. The moves will also affect employees at several U.S. powertrain and stamping facilities.
About 900 workers across all affected sites will be temporarily laid off, including workers at several U.S. powertrain and stamping facilities, a Stellantis spokeswoman said.
The Stellantis Windsor Assembly Plant in Windsor, Ontario, where about 900 workers will be temporarily laid off for two weeks. (Emily Elconin/Bloomberg News)
Toyota has halted overtime work at its plant in Guanajuato, Mexico, for the time being in response to the tariffs, said Alejandro Rangel, head of the SITIMM union that represents workers at auto suppliers in central Mexico. The plant makes the Tacoma hybrid pickup and exports most of its production to the U.S.
A spokesperson for the Japanese automaker said it has stopped exporting vehicles made at that plant and another near the U.S. border in Baja California. The change was made to adjust inventory levels to due limited storage space at the sites and will likely return to normal April 4, the spokesperson said.
Honda Motor Co. meanwhile is holding talks with workers to reduce or cancel overtime for the next six weeks at its assembly plant in the same state that makes the HR-V small crossover, largely for export, Rangel said.
A Honda spokesperson said the company has made no changes in production at the plant, which also produces the Acura MDX midsize SUV.
New Hyundai vehicles at the Port of Tacoma in Tacoma, Wash., on March 27. (David Ryder/Bloomberg News)
Rangel said further reductions at those plants are not expected for now because demand for those vehicles exceeds the factories’ installed capacity.
“This is very important news here in the region because around each of these two automotive plants, we have between 30 and 40 companies that are direct suppliers to these plants,” Rangel said.
Europe Carmakers
Mercedes-Benz Group AG production chief Jörg Burzer said April 3 that the carmaker is considering making more vehicles in the U.S. in response to the tariffs. The company is also weighing whether to pull its least expensive cars, such as the GLA small SUV, from the U.S. market, because the tariffs would make those vehicles economically unfeasible, Bloomberg reported.
“We’re still assessing the impacts of these tariffs,” Burzer said on the sidelines of a company event in Stuttgart, Germany. “We have made some plans, but flexibility is absolutely key.”
Volvo Car AB CEO Håkan Samuelsson also pledged to increase the number of cars it builds in the U.S. and move another model to its South Carolina factory. The Swedish carmaker “will have to look closely” at which model it will add to production lines, he said.
Meanwhile, Volkswagen AG sent a memo to its U.S. dealers warning them that it plans to add import fees to the sticker prices of vehicles it ships into the U.S.
