The return of Donald Trump to the White House starting in January will mean a new twist to the global trade fight, especially because one of the first measures he has announced are new tariffs for products manufactured in Mexico and Canada , which will hit, above all, the automobile industry. Trump aspires to revitalize local production, but, in reality, he may take away a substantial part of the profitability of the large American and European car manufacturers. Companies that are not experiencing their best moment either, while the competition from ‘made in China’ plug-in vehicles has managed to gain a foothold in the market.
Tariffs have become a weapon. This same week, Trump has once again threatened European partners. “I told the European Union that they must make up for their tremendous deficit with the United States by purchasing our oil and gas on a large scale. Otherwise, it will be a matter of TARIFFS!!!”, he assured on the Truth Social network.
Betting on a more restrictive tariff policy is not something that only Donald Trump has proposed. During his final stretch in the White House, Joe Biden has given the green light to a surcharge of up to 100% on electric cars manufactured in the Asian giant, in addition to prohibiting any import of software of Chinese origin in connected vehicles for considering which are an open door to espionage. Meanwhile, the European Union has also approved more tariffs on electric vehicles assembled in China, in an attempt to protect local manufacturers against competitors who are capable of producing much cheaper.
A promise after winning the elections
For now, Trump’s future trade policy regarding the automobile industry is a declaration of intent and we will have to see how it comes to fruition. What he announced after the presidential elections is that he will impose tariffs of 25% on all products manufactured in Mexico and Canada, and 10% on those imported from China. A measure that will raise the price of these products at a time when the inflationary spiral seems to be under control, but not completely. For this reason, the Federal Reserve has been cautious about lowering rates during 2025, because recent data shows that prices are falling more slowly than its economists thought.
Trump linked the tariffs, not to inflation, but to the fight against drug trafficking. “On January 20, as one of my many first executive orders, I will sign all the necessary documents to impose on Mexico and Canada a 25% tariff on ALL products entering the United States and its ridiculous open borders,” he assured. in a message through Truth Social. “This tariff will remain in effect until drugs, particularly fentanyl, and all illegal immigrants stop this invasion of our country. “Both Mexico and Canada have the absolute right and power to easily resolve this problem,” he indicated.
At the moment, there is no certainty about how Trump is going to act, although his intentions seem clear and the actors in the motor industry are making calculations about how the surcharges on cars manufactured especially in Mexico may affect them and if they can compensate them, mainly , moving production, or a part of it, to factories that already have them on US soil. Furthermore, it would not only entail a surcharge on the vehicles, but also on the production of components, although those models would then end up being assembled in the United States.
The most exposed companies
Most large manufacturers have opted, above all, for production in Mexico due to its lower production costs and its proximity to the United States. Something that both American and European companies have done. One of the most exposed is Stellantis, which is behind brands of North American origin, such as Chrysler or Jeep, and European, such as Fiat, Renault or Peugeot. In its case, it has eight production centers in Mexico. Meanwhile, General Motors has seven factories in that country and Ford, another three. Another European group, such as Volkswagen, has two factories in that market, but is considered one of the largest manufacturers in the country, along with General Motors.
While waiting to know what these new tariffs look like and to see more precisely how much it may mean for companies, there are analysis firms that have already made some estimates. This is the case of S&P, which has calculated that, if measured for the entire automobile industry, the tariffs prepared by Donald Trump could represent up to 17% of the sector’s overall operating profit (Ebitda).
If you go into detail by company, the hardest hit would be General Motors, Stellantis, Volvo and Jaguar Land Rover, which can even risk more than 20% of your Ebitda. Meanwhile, in the case of Volkswagen and Toyota it could represent between 10% and 20% of this gross operating result. Among the least affected would be BMW, Mercedes, Hyundai-Kia and Ford, which would remain below 10%.
At the moment, manufacturers are not making too much noise about how they value Trump’s ads, but it is not the first time that he has talked about tariffs. He already did so during his first term, when he threatened the automobile industry with protectionist measures and assured that vehicle imports could be a “threat to national security.” At that time, the then secretary general of the European car manufacturers’ association, ACEA, Erik Jonnaert stated that “the unilateral imposition of tariffs or quotas would clearly violate the rules of the World Trade Organization.” A criticism that would indicate where the response will go if the tariffs materialize in 2025.
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