DETROIT

President-elect Donald Trump's proposed 25% tariff on imports from Mexico and Canada threatens to deliver a substantial blow to the United States automotive industry, potentially causing widespread economic repercussions that could harm manufacturers, workers, and consumers alike.

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General Motors (GM) stands to suffer the most significant impact, with projections indicating the company will import over 750,000 vehicles from Canada and Mexico this year, predominantly manufactured in Mexican facilities. These imports include nearly 370,000 Chevy Silverado and GMC Sierra full-sized pickups, alongside approximately 390,000 mid-sized sport utility vehicles.

Other major Detroit manufacturers, including Ford and Stellantis, will also experience considerable financial strain. The Mexican automotive trade association reports that the top 10 car manufacturers with Mexican plants collectively produced 1.4 million vehicles in the first six months of the year, with 90% destined for the US market.

The proposed tariffs extend beyond mere economic policy, with Trump framing them as a punitive measure against immigration and drug trafficking. He has explicitly stated that the tariffs would remain in place until Mexico and Canada halt what he describes as an "invasion" of "illegal aliens".

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Economists and analysts suggest the tariff threat might be more of a negotiating tactic than a concrete policy proposal. Thomas Ryan, North America economist at Capital Economics, noted that the explicit reference to border issues implies potential flexibility in the approach.

Mexican President Claudia Sheinbaum has strongly criticised the proposed tariffs, calling for dialogue and warning that such measures would exacerbate inflation and potentially eliminate jobs in both countries. She also hinted at the possibility of retaliatory measures, although Mexico's economic vulnerability limits its negotiating power.

The potential economic fallout extends far beyond manufacturer profits. US consumers would likely bear the brunt of increased prices, with tariffs inevitably passed down through higher vehicle costs. This could particularly impact popular models manufactured in Mexico, including the Toyota Tacoma, Ford Maverick, Stellantis' Ram, and GM's Chevrolet Silverado and GMC Sierra.

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The automotive supply chain's intricate nature means the tariffs could disrupt more than just complete vehicle imports. Mexico currently supplies 43% of all US auto-part imports, a statistic that underscores the deep economic interdependence between the two nations.

Industry experts warn of broader implications. Sam Fiorani from AutoForecast Solutions predicts that manufacturers will either need to absorb increased costs or pass them directly to consumers, potentially rendering some vehicle models financially unviable.

Francisco Gonzales, head of Mexico's National Industry of Autoparts, emphasised the importance of regional cooperation, stating that producing everything in a single country would render automotive manufacturing uncompetitive.

The stock market has already reacted to the potential policy, with GM shares falling 8.2%, Stellantis dropping 5.5%, and Ford experiencing a 2.6% decline.

These proposed tariffs represent a significant challenge to the automotive industry's carefully constructed North American supply chains, which were initially established under NAFTA and later refined through the United States-Mexico-Canada Agreement (USMCA).