Auto sector could endure blows from Trump tariffs on Mexico
Move threatens Canada’s 65 firms
Hundreds of auto parts suppliers could be pushed to raise prices if President Donald Trump follows through on his threat to place tariffs on Mexican imports to the United States, a plot twist analysts predict would have a material impact on the entire North American automotive sector, given how intertwined supply chains are across the three countries.
Sixty-five Canadian auto parts makers that run 120 plants in Mexico would be directly affected if Trump slaps a five-per-cent tariff on any good from Mexico, rising to up to 25 per cent unless America’s southern neighbour stops asylum seekers from crossing the border. These auto parts plants, where an estimated 44,000 workers make parts for vehicle assembly in both Mexico and the U.S., would in turn pass the costs on to their customers, raising costs in a mature industry that’s already grappling with single-digit profit margins, Automotive Parts Manufacturers’ Association president Flavio Volpe said in an interview. “There are no borders,” said Volpe. “If it’s imposed, it may have a material impact.”
The threat of new tariffs beginning on June 10 spooked auto industry investors. The stock prices of Canada’s two largest auto parts makers, Magna International Inc. and Linamar Corp., fell more than two per cent and three per cent, respectively, on Friday.
The big three U.S. automakers fared worse in trading. Share prices for Fiat Chrysler Automobiles fell 5.5 per cent and General Motors Co. dropped more than four per cent, while Ford Motor Co.’s shares fell more than two per cent.
“Intertwining difficult trade, tariff and immigration issues creates a Molotov cocktail of policy, and America’s manufacturing workers should not be forced to suffer,” said Jay Timmons, president and CEO of the U.S. National Association of Manufacturers.
There appeared to be “no policy rhyme or reason” for the tariffs that Trump announced just as progress was being made on ratifying the new North American trade pact, Volpe said.