Tundra trucks and Sequoia SUVs at Toyota’s truck plant in San Antonio, Texas, in 2023. President Donald Trump’s tariffs will cost U.S.-based automakers at least US$10-billion through the end of October, a new analysis has found.Jordan Vonderhaar/Reuters
President Donald Trump’s tariffs on imported automobiles and parts from Canada and Mexico will cost U.S.-based automakers at least US$10-billion through the end of October, a new analysis has found.
The tally comes from a report by Anderson Economic Group (AEG), a consultancy based in East Lansing, Mich., that analyzed data supplied by the U.S. Census Bureau.
Patrick Anderson, principal of AEG, said automakers that have operations that span the North American borders are faced with a “huge bill.” The added costs will drive up car prices, reduce sales and cause autoworker layoffs, he said.
“There is no way for $10-billion to be absorbed by the automakers and suppliers alone,” Mr. Anderson said. “Consumers and workers are going to bear some of these costs.”
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The figure underscores the cost of Mr. Trump’s move to disregard the North American free-trade agreement he signed in his first term and impose the imports taxes in April. He relied on Section 232 of the Trade Expansion Act of 1962 to impose tariffs on imported cars, metals and other goods, declaring them a threat to national security.
Mr. Trump says he wants automakers to move their plants to the U.S., and that the country does not need cars made in Canada.
General Motors has said tariffs cost US$1.1-billion in the second quarter alone, while Ford Motor Co. pegged its full-year cost at about US$2-billion this year.
Both automakers will provide fresh looks at the tariff impact when they report quarterly earnings next week.
Automakers have responded to the tariffs by shifting production, delaying or eliminating some models and raising prices. In Ontario, home to five automaking companies, thousands of workers at assembly plants and parts suppliers have lost their jobs.
Through the end of July, tariffs on Canadian-made cars totalled US$1.4-billion, while parts were subject to US$386-million, AEG said, excluding estimates for the remaining months. Canadian and Mexican cars are taxed at 25 per cent, reduced for U.S. content. The content of auto parts that is not compliant with the North American free-trade deal are subject to the import taxes.
Mr. Anderson said the figures underestimate the total tariff costs borne by companies in the U.S. because they include only the two major categories of cars and parts. Also left out are tariffs on steel and aluminum, and imported automobiles from Europe and Asia, he said.
To alleviate the tariff pressures, Stellantis NV this week said it will expand U.S. production by 50 per cent over the next four years. The plan includes making the Jeep Compass in Belvidere, Ill., rather than Brampton, Ont. This has raised fears about the future of the plant northwest of Toronto, which has been closed for almost two years awaiting retooling for the Jeep.
Despite the hard times that Ontario’s auto sector faces, Peter Frise, a professor at the University of Windsor, said Mr. Trump’s goal of forcing automakers to abandon their North American supply lines and ramp up U.S. production faces a tough reality: a U.S. labour shortage.
“They don’t have a lot of highly skilled people, and their education system is not pumping out a lot of highly skilled people,” Prof. Frise said by phone.
“This is something the car companies look at because there’s no point in putting up a plant where you need to employ 10,000 highly skilled people if you can’t hire 10,000 highly skilled people in that locale.”