The Trump administration is threatening a 25% tariff on all imports from Canada and Mexico as soon as Saturday — a move that would almost immediately impact car dealerships and factories in the United States.
The tariffs would add a minimum of thousands of dollars to the cost of cars, according to experts. And not just cars that are assembled in those two countries and shipped to the United States, but also cars built at American auto plants, all of which have Canadian and Mexican parts that can not easily be replaced.
President Donald Trump had argued on the campaign trail that tariffs are the only way to save the American auto industry, even though automakers are reporting record, or near-record, profits without them. But what is clear is that tariffs could upend the production of vehicles across the continent and put the price of cars, already near record highs, out of reach for many buyers.
Car factories could start slowing down — or even shutting down — in relatively short order, Michael Robinet, vice president of forecast strategy at S&P Global Mobility, told CNN last week. That’s because even if a car is assembled in the United States, every vehicle has parts imported from Mexico and Canada that would be subject to the tariffs, raising production costs. There simply is no such thing as an all-American car.
Automakers in the three countries have operated as a relatively unified market for years due to NAFTA and, subsequently, the USMCA trade deals, as vehicles and parts moved freely across the border, sometimes multiple times before a car is completed.
Tariffs have a strong possibility of skewing and disrupting the car market in a way similar to during the COVID-19 pandemic, according to Robinet. Limited supplies of new cars for sale following Covid sent new car prices, and even used car prices, soaring.
Robinet said automakers will do a cost calculation soon after the tariffs go into effect and could decide that it is better to slow or even stop production at US plants rather than pay the tariffs imposed on their Canadian and Mexican parts. They’ll do so hoping that the trade dispute is worked out before the inventory of cars and trucks on their dealer lots is exhausted, he said.
Robinet believes slowdowns or shutdowns could come fairly quickly, especially at plants automakers operate in Mexico and Canada. Mexico built about 4 million vehicles last year, while Canada built 1.3 million, according to data from S&P. And roughly 3.7 million, or about 70% of those Canadian- and Mexican-assembled vehicles, were shipped to showrooms in the United States. By contrast, there were 10.2 million passenger vehicles built at US assembly plants in 2024.
And it’s not just Fords and Chevrolets being churned out of American auto plants. The Subaru Outback is built in Indiana, and thousands of BMW X5 SUVs roll out of a plant each week in South Carolina. Mercedes SUVs are built in Alabama, and the popular Kia Telluride is built in Georgia. Nearly half of the 10 million vehicles built at American auto plants are for those foreign brands.
But perhaps more importantly, those 10.2 million cars that are “made in America” are all built with Mexican and Canadian parts — from relatively cheap wire harnesses and fasteners to expensive engines and transmissions. The impact will thus be felt in short order, Robinet added.
And cars and their parts aren’t just flowing over the borders into the United States. Plenty of them leave the United States, too, as American factories ship a fair number of their own vehicles and parts to Canada and Mexico. Mexican and Canadian authorities have threatened to slap retaliatory tariffs on American goods if the Trump administration goes ahead with its tariff threat. So some of the cars and parts built at US plants won’t be able to get to their buyers north and south of the border without thousands of dollars worth of tariffs, as well.
US ships cars, parts to Canada and Mexico too
The United States shipped $13.8 billion worth of cars to Canada during the first 11 months of 2024 and $26.5 billion worth of parts. It also shipped $4.2 billion worth of vehicles to Mexico in the same period and $33.7 billion worth of parts.
Others don’t believe production at US plants will be affected immediately, but agree it won’t continue for long if tariffs are imposed and aren’t quickly resolved. Some automakers have likely been stockpiling the parts they need from those two countries so they can keep tariff-free production going as long as possible.
Even if they have to pay some tariffs on parts in their American-built vehicles, the additional costs might not be crippling for some of the cheaper parts, Erin Keating, executive analyst at Cox Automotive, told CNN. But she also doesn’t think the industry will stomach tariffs for an extended period of time.
“I don’t see the industry tolerating it for very long,” she said. “Within maybe 30 to 45 days, I could see them moving onto Plan B and Plan C if this is not resolving itself.”
She said plants in Mexico and Canada might continue to produce cars and just not ship them to the United States until the situation is resolved.
All the major automakers either had little comment about what they will do if tariffs go into effect or did not respond to CNN’s request for comment.
“We aren’t going to comment on speculation,” said Mark Giles, spokesman for Volkswagen, which not only has a plant in Chattanooga, Tennessee, but also the largest car factory in Mexico.
Increased prices at dealerships
And if production is scaled back, or if shipments from Canadian or Mexican plants are put on hold, dealers are not going to be eager to sell their current supply of vehicles at current market prices, in anticipation that a shortage could drive up prices in the weeks and months to come, said Robinet and Ivan Drury, director of insights at Edmunds.
“Right now, sales have been somewhat weak. But if production does stop, it will not take many days for the dealers to be much more firm on pricing,” Drury told CNN.
The average days’ supply of vehicles now available at US dealerships range from 25 days for Toyota Motor, which includes Lexus, to 73 days supply for Ford Motor, which includes its Lincoln luxury brand.
It will be important for the dealers and the automakers to have this issue resolved by March or April, said Keating. That’s when tax refunds start to arrive and makes the spring a key sales period for automakers.
“If we look out 45 days, we’re into prime tax refund season. I think you’d hear tremendous amount from dealers if there’s a shortage of vehicles then,” said Keating.
But once the tariffs are in place, it’s going to be the car buyers — not the automakers, the dealers, or Mexico or Canada — who will be paying the thousands of dollars more for each vehicle, said Robinet.
“American car buyers, Canadian car buyers, Mexican car buyers — that’s who’s paying the tariffs,” he said. “Automakers and parts suppliers are not charities. They’re not going to absorb the cost.”
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