Detroit, Michigan – President Trump’s 25 percent tariffs on goods from Canada and Mexico could have significant implications for automakers and car buyers in the United States. The interconnected supply chains that have been established over the past three decades, following the creation of the North American free trade zone in 1994, have made it challenging to distinguish between American-made vehicles and imports.
Manufacturers benefit from economies of scale by operating engine and transmission plants that serve multiple vehicle factories in North America. Components like seats, instrument panels, electronics, and axles are sourced from various countries, contributing to the affordability and competitiveness of the automotive industry. For example, the 2024 Chevrolet Blazer is assembled in Mexico using parts from the United States, blurring the lines between domestic and imported vehicles.
As the Trump administration considers applying tariffs to components like engines that cross borders during production, automakers are expressing concerns about the potential impact on the industry. Ford Motor’s chief executive, Jim Farley, warned that a 25 percent tariff on goods from Mexico and Canada could have devastating consequences for the U.S. automotive sector. Stellantis, the parent company of Chrysler and Jeep, supports American manufacturing but advocates for tariff-free trade with Mexico and Canada.
Over the past two decades, the number of imported vehicles sold in the United States has remained relatively stable, with Mexico, Japan, South Korea, and Canada being major sources. In contrast, domestic car production has fluctuated, experiencing a significant decline during the 2008-2009 financial crisis. Despite fluctuations, the industry has shown resilience over the years, with production volumes gradually recovering.
While some consumers may not be concerned about the origin of their vehicles, the impact of tariffs on the automotive industry could have far-reaching consequences for automakers and consumers alike. As debates surrounding trade policies continue, the future of American car manufacturing remains uncertain, with stakeholders closely monitoring developments in the industry.