North American car companies have operated across borders for three decades. Tariffs would raise prices and cost jobs in the short run, analysts say.
Automakers ship billions of dollars’ worth of vehicles and parts across the U.S. borders with Canada and Mexico every day. President Trump’s plan for 25 percent tariffs on imports from those countries could severely disrupt those operations.
On Monday, hours after his inauguration, Mr. Trump said he planned to impose the tariffs beginning Feb. 1. Now the question is whether he will follow through — or what terms might keep him from doing so.
“Most people in the industry are waiting to see what happens and to see what the administration is looking for from Canada in Mexico,” Mark Wakefield, global automotive market lead at AlixPartners, a consulting firm, said on Tuesday. “For now they assume this is a negotiating chip than it is something that’s really going to happen, more of an exercise to bring people to the table.”
General Motors and Ford Motor declined to comment on the matter. Both companies produce significant numbers of vehicles and components in Canada and in Mexico, and both ship vehicles and parts from plants in the United States into those countries.
In theory, tariffs would force automakers to move production to the United States and ultimately create more jobs. But re-engineering cross-border supply chains, which are designed to deliver parts to car factories only hours before they are installed in vehicles, would be extremely difficult and costly.
And in the short run, tariffs on vehicles and parts from Canada or Mexico would lead to higher prices at dealerships and lower demand for cars. Rather than protecting U.S. auto workers, as Mr. Trump has promised, tariffs would lead to job losses because automakers would cut their work forces to compensate for slumping sales, analysts said.