President Trump announced plans to impose 25% tariffs on Canadian and Mexican imports as early as February 1, citing concerns about undocumented migration into the United States. The proposal could disrupt the North American automotive industry's over six decades of interconnected supply chains.
The automotive sector is the largest trade category between the three nations. According to James Rubenstein, professor emeritus at Miami University, one-third of gasoline vehicle engines cross either the Canadian or Mexican border during production. Parts frequently move between countries multiple times, with some components crossing borders up to eight times during the manufacturing process, says David Gantz, a fellow at the Baker Institute for Public Policy.
"It’s not unusual for a part to go back and forth seven or eight times,” he said.
Even vehicles marketed as American-made rely heavily on international components. Jonathan Smoke, chief economist at Cox Automotive, points to the Tesla Model 3 as an example: while assembled in the United States, it sources 20% of its content from Mexico. Smoke notes that no U.S.-assembled vehicle contains more than 70% domestic content and wondered how the tariff would be assessed—one-time or at each crossing.
“So does that mean 25% gets applied every time it crosses?” Smoke said.
The proposed tariffs affect the entire automotive supply chain. Components like transmissions and engines, which can contain thousands of individual parts, are particularly vulnerable due to their reliance on cross-border manufacturing processes.
