US Tariffs, EV Rollbacks Fuel Uncertainty in Auto Industry

The automotive industry is at a critical juncture as US President Donald Trump announced plans to impose tariffs on imported vehicles and parts starting on Feb. 1, while signaling a rollback of key environmental commitments.

Trump’s tariff strategy, part of his broader economic nationalism agenda, has raised concerns among global automakers.  “Donald Trump promised in his election campaign to reduce inflation. In this respect, we are hoping for further discussions on this topic,” said Hildegard Mueller, president, Germany’s VDA auto association, who noted during a press conference that these tariffs could exacerbate inflation in the United States. 

Automakers reliant on Mexico for production are particularly vulnerable. Companies such as Volkswagen and Stellantis, which have substantial investments in Mexican facilities, expressed concerns about the economic implications of these tariffs. 

“We are concerned about the harmful economic impact that proposed tariffs by the US administration will have on American consumers and the international automotive industry,” said a Volkswagen representative. The company has committed to investing over US$10 billion in US facilities, including its Chattanooga plant and a joint venture with Rivian.

On the environmental front, Trump has rescinded the US commitment to the Paris Agreement for a second time and pledged to repeal electric vehicle (EV) adoption mandates. These mandates previously aimed to ensure at least 50% of U.S. vehicle sales would be electric by 2030. “We’re ending the electric vehicle mandate to save our country’s auto workers. Americans will be able to buy the cars they want, built here in the United States,” Trump said during his second inaugural speech.

Despite this rollback, industry analysts and automakers maintain that market forces will continue driving the EV transition. “This decision may delay technological change, but automakers in the US and Mexico will proceed based on consumer demand, ensuring continued growth in EV production,” said Alberto Bustamante, director general, National Automotive Suppliers Agency (ANAPSA). 

General Motors (GM), the largest automaker and exporter in Mexico, reaffirmed its commitment to electrification. The company has invested heavily to convert its facilities in both countries for EV production. This year, GM plans to launch new electric models, including the Cadillac Optiq EV from its Ramos Arizpe plant and the Cadillac Escalade IQ in the US Stellantis has also announced additional investments in Mexico to expand its EV production capabilities, anticipating growing demand in North America.

Tesla, however, may face challenges if Trump eliminates the US$7,500 federal tax credit for EV buyers. “Trump’s aggressive economic nationalism and protectionist policies could hinder EV growth in the United States, but long-term investment plans will mitigate the immediate impact,” said Ignacio Martínez, trade analyst, UNAM, in an interview with El Economista.