The recent decision to pause tariffs on trade with Mexico for a month has given the auto industry some breathing room, but uncertainty still looms over both short and long-term impacts.
“If there is a pause across the board, for both Mexico and Canada, a pause would give the auto industry further time to try to see how it can adjust production where possible,” Phil LeBeau, CNBC’s automotive reporter, told Local 4 Monday. “You’re not going to get away from it completely — there will be a cost impact in some fashion.”
The big concern, however, is what happens when these tariffs eventually take effect, said LeBeau.
He said the tariffs would greatly impact the financial performance of automakers and parts suppliers, as they would require them to charge more.
“They won’t be able to eat this entirely,” LeBeau said. “They’re going to have to pass along that increased cost to you and me when we go out to buy a vehicle — maybe not all of it, but a good chunk of it.”
We know cars and trucks made in America are often made across North America. A single car part can cross the border into Mexico or Canada multiple times before final assembly, which means tariffs would add costs at each stage: 25%.
“More than half of the components that are going into vehicles built in the United States are imported from either Mexico or Canada—more from Mexico than from Canada,” LeBeau said. “People might sit there and say, ‘Well, let’s just build more in the United States.’ The way the auto industry is set up, it’s regionalized, and there are some vehicles at some plants that have a lot of U.S. content that are going to be less impacted than a vehicle -- like the Toyota RAV4, which is built in Canada.”
Popular models like the Chevrolet Equinox would also feel the impact.
“It was kind of concerning, ‘Like man, how much more is this going to affect our business,’” said Terry Lange of Suburban Ford. “But seeing how this outcome is coming, again, I don’t see a huge impact that we’re going to have to worry about.”
When asked if the pause was kind of giving him some relief, Lange said, “There’s more relief coming with these pauses than there is worry.”
Meanwhile, automakers with production in Mexico, such as General Motors and Ford, may have to reconsider how they distribute manufacturing across different plants.
“They can adjust some of that and put some of that production here in the United States,” LeBeau said, using the Chevy Silverado as an example. “Maybe move to Fort Wayne or to Flint, as much as possible, they’ll try to do that. But you can’t move all of it. You’re going to feel some impact.”
If tariffs are implemented, the auto industry and consumers will also face a significant price increase. A 25% tariff on anything that is built in Mexico or Canada that is brought into the United States — either to be sold to the consumer or to be used in a vehicle that’s built here in the United States would likely be passed on to car buyers, affecting affordability and potentially slowing down auto sales.
“A lot of consumers could sit there and say, ‘Am I comfortable paying $45,000 for a vehicle? Okay. Am I comfortable paying $49,000 for a vehicle? Maybe not,’” said LeBeau.
LeBeau added that Michigan would be hit the hardest by tariffs — especially on Canada — due to its deep economic ties with the auto industry.
“Michigan will feel the impact of the Canadian tariffs far greater than any other state in the Midwest,” LeBeau said. “Illinois, Indiana, Ohio—because they have manufacturing that is tied into so much that comes from Canada—will also feel an impact. But Michigan will feel the biggest impact.”
With Windsor sitting right across the border from Detroit, the two regions rely on seamless trade to keep the industry moving. And with a 25% tariff, there’s going to be implications: “To what extent, we don’t know,” LeBeau said.
For now, the 30-day pause on tariffs for Mexico offers automakers a temporary opportunity to prepare.
“It’s encouraging that they were put on pause when it comes to Mexico,” LeBeau said. “Now, we’ll see what happens with Canada. Canada is still huge. It’s a huge part of the auto industry. Certainly, here in Michigan, the implications are massive.”
