The US auto industry is bracing for a major setback as new tariffs on vehicle imports from Canada and Mexico threaten to upend long-standing trade relationships.
If the 25% tariffs move forward, they could disrupt more than $300 billion in automotive trade, making vehicles more expensive and supply chains harder to manage.
Industry experts warn that the cost of new cars, already approaching $49,000 on average, could rise by at least $3,000, while some full-size trucks might see a $10,000 jump in price. The impact could extend beyond the US, potentially pushing Canada and Mexico into recession if they retaliate with their own tariffs.
North America has functioned as an integrated car manufacturing hub for decades, benefiting from free trade agreements that allowed automakers to use Canadian steel, Mexican labor, and US technology to produce vehicles efficiently. Companies like Ford, Stellantis, and General Motors depend on this system to keep costs down. Last year alone, the US imported over 8 million cars and light trucks, with more than half coming from Canada and Mexico.
Applying tariffs to vehicles and parts crossing the border would add significant costs at every stage of production. Auto components frequently move between factories in all three countries before a final product is assembled. Experts describe this as a logistical nightmare, with increased red tape and higher administrative costs.
Adding to the pressure, these tariffs would coincide with higher taxes on steel and aluminum, which Trump plans to raise to 25%. That means automakers would pay a staggering 50% duty on steel and aluminum from Canada and Mexico, key suppliers of these materials.
The financial burden is expected to hit consumers the hardest. A decade ago, the lowest-earning 20% of Americans couldn’t afford a new car. Today, that number has climbed to 40%, and the new tariffs could push prices even higher, making it even harder for many to buy a vehicle.
With rising costs and potential economic fallout, the auto industry is preparing for a challenging road ahead.