Trump’s Tariff Plans Spark Worries for Mexico-Based Automakers

President Donald Trump has reaffirmed his position on imposing tariffs on Mexican-made automobiles, insisting that vehicles manufactured in Mexico should instead be produced in the United States.

"In Mexico, they are building car plants everywhere to manufacture cars and sell them in the United States. I say: 'No way, they are not going to do that.' We are going to impose high tariffs on those automobiles," Trump stated during an interview with Fox News. 

Although Trump did not specify the tariff percentage or provide a timeline for implementation, his comments have raised alarm among automakers with substantial manufacturing operations in Mexico. A report by Fitch Ratings suggests that major global car manufacturers–including General Motors, Honda, Nissan, and Stellantis– are evaluating strategies to address the potential effects of a 25% tariff on vehicles imported from Mexico and Canada.

According to Fitch, automakers are considering options such as diversifying supply chains, adjusting vehicle pricing, and optimizing operational costs. However, significant changes in production plans are unlikely until the US government formally enacts the tariff policy, which was postponed for a month last week.

The Mexican automotive industry has already encountered difficulties, with vehicle exports dropping 13.7% year-over-year in January, despite a 1.68% increase in production, according to data from the National Institute of Statistics and Geography (INEGI). The decline in exports coincides with Trump's return to the presidency and his ongoing focus on tariffs, despite Mexico being the United States' top trading partner.

The proposed tariffs have drawn criticism from industry leaders. Jim Farley, CEO, Ford Motor Company, remarked that Trump's trade policies have caused "a lot of cost and a lot of chaos." While acknowledging the goal of bolstering the US auto sector, Farley underscored the disruptions resulting from these measures.

Ford executives noted that the company is preparing for the potential 25% tariff by building inventory ahead of time. While Ford has not been significantly affected by increased tariffs on steel and aluminum—thanks to its reliance on domestic sources—it anticipates absorbing additional costs from suppliers impacted by these tariffs.