The global auto industry is bracing for impact as former President Donald Trump’s threat to impose 25% tariffs on vehicle imports from Canada and Mexico looms. With a possible implementation as soon as Saturday, automakers are scrambling to assess the potential fallout. While some companies have prepared contingency plans, the uncertainty has already sent ripples through the market, affecting stock prices and business strategies.
Uncertainty Clouds the Automotive Market
For months, automakers have been adopting a “wait-and-see” stance regarding Trump’s proposed tariffs. The former president initially promised to implement these duties upon his inauguration, later setting a February 1 deadline for action.
Even if the tariffs do not take effect, manufacturers such as General Motors (GM), the top U.S. seller, are seeking clarity to structure their business accordingly. Any additional tax on imports would increase vehicle costs, potentially lowering consumer demand and affecting overall sales.
This uncertainty has already impacted GM’s stock. Despite surpassing Wall Street expectations in its 2025 financial outlook, GM’s share price took a significant hit on Tuesday. “Our key take from GM’s 4Q [earnings] result is that while the opportunity for GM is highly compelling, US policy uncertainty must be navigated for the time being,” Barclays analyst Dan Levy noted in an investor report.
Tariffs Could Deal a Heavy Blow to Automakers
Tariffs function as taxes on imported goods, meaning companies that rely on foreign production would face higher costs. The concern is that these costs would ultimately be passed on to consumers, increasing vehicle prices.
The impact of a 25% tariff could be massive, according to S&P Global Mobility. “Regardless of timing, these blanket tariffs would have a massive impact on the auto industry,” the firm stated. “Virtually no [automaker] or supplier” in North America would be unaffected.
Major automakers have established factories in the U.S. but still rely on Mexican and Canadian imports to meet demand. Mexico, for instance, imports 49.4% of all its auto parts from the U.S., while exporting 86.9% of its production back to American markets.
Wells Fargo estimates that the tariffs could cost Detroit’s major automakers billions of dollars annually. The firm projects that GM, Ford, and Stellantis would face a combined $13 billion impact at a 5% tariff, $25 billion at a 10% tariff, and a staggering $56 billion if Trump imposes the full 25% rate.
Who Will Be Hit the Hardest?
Some automakers would be more vulnerable than others due to their reliance on Mexican production. According to S&P Global Mobility, plants in Canada and Mexico produced approximately 5.3 million vehicles in 2024, with nearly 4 million bound for the U.S.
Mexico leads in exports to the U.S., and five major companies—Ford, GM, Stellantis, Toyota, and Honda—are particularly reliant on their factories there. However, German automaker Volkswagen is the most exposed to the tariff threat, with 43% of its U.S. sales coming from Mexican-built vehicles. Nissan follows with 27%, while Stellantis, GM, and Ford also stand to face significant losses.
Antonio Filosa, Stellantis’ head of North American operations, acknowledged the company is preparing for different scenarios but is waiting for clarity. “We are working, obviously, on scenarios,” he said. “But yes, we need to await his decisions and after the decision of Mr. Trump and his administration, we will work accordingly.”
A Costly Future for Automakers and Consumers
If the proposed tariffs move forward, the repercussions will be felt across the automotive industry, impacting manufacturers, suppliers, and ultimately consumers. A 25% tariff on a $25,000 car built in Canada or Mexico would add an estimated $6,250 to its price.
With major manufacturers bracing for potential disruption, the auto industry remains on high alert. Whether or not the tariffs are implemented, the mere threat is already shaping strategic decisions for the years ahead.