Automotive suppliers are being advised to develop contingency plans ahead of President-elect Donald Trump's proposed 25% tariffs on Canadian and Mexican imports, which could significantly disrupt North American automotive supply chains.
Mexico currently accounts for 16.1% of U.S. vehicle sales and 42% of auto parts imports, while Canada represents 7.3% of vehicle sales and 10% of parts imports, according to Wards Intelligence, GlobalData, and U.S. International Trade Administration data.
"Nothing would have more impact than tariffs on Canada and Mexico," Elaine Buckberg, senior fellow at Harvard University's Salata Institute and former General Motors chief economist told Automotive Drive.
Industry experts recommend several mitigation strategies, including tariff engineering, reviewing country-of-origin classifications, and utilizing foreign trade zones. However, relocating production facilities could take at least 18 months, making immediate price increases likely if tariffs are implemented.
Dan Hearsch of AlixPartners notes that while many supplier contracts include provisions for unexpected taxes, companies should not rely solely on being able to pass costs to manufacturers. The Trump transition team is also reportedly considering additional targeted tariffs on electric vehicle battery supply chains.
