President Trump’s tariffs on goods from Canada and Mexico could hit automakers and car buyers hard. Many vehicles and their parts cross the U.S. border daily, and these tariffs would increase costs.
Over the past thirty years, since the North American Free Trade Agreement in 1994, car manufacturers have created supply chains that span across borders. This system helps them lower costs. For example, they build large plants to supply engines and transmissions to various factories in North America. This approach also applies to other parts like seats, dashboards, and electronics.
Sam Fiorani, from AutoForecast Solutions, explained that this cross-border manufacturing benefits everyone. “It utilizes the strengths of each nation, which helps businesses and consumers alike,” he said. If all car parts were made in one country, prices would rise.
Determining if a vehicle is “American-made” or imported is now tricky. A vehicle is classified as an import if it is assembled outside the U.S., even if many parts come from inside the country. Take the 2024 Chevrolet Blazer, for instance. It’s assembled in Mexico but uses engines and transmissions from the U.S.
Nissan produces its Altima sedan in Tennessee and Mississippi. However, its turbocharged engine comes from Japan, while the transmission is made in Canada. Similarly, most Toyota RAV4s sold in the U.S. are made in Canada. These vehicles often use parts from the United States before being sent south for sale.
The Trump administration has not clarified how tariffs would affect components sent across the border and then returned in finished vehicles. The RAV4 is considered imported from Canada, but about 70% of its parts, by value, come from the U.S. data from the National Highway Traffic Safety Administration confirms this. On the other hand, the Nissan Rogue is assembled in Tennessee but only contains 25% U.S. parts, with its engine sourced from Japan and its transmission from Mexico.
The uncertainty surrounding these tariffs has left automakers anxious. Jim Farley, CEO of Ford Motor, stated that a 25% tariff would seriously harm the U.S. auto industry. Stellantis Chairman John Elkann shared this sentiment, advocating for tariff-free trade with Canada and Mexico.
In terms of imports, the largest number of vehicles sold in the U.S. still come from Mexico, followed closely by Japan, South Korea, and Canada. Over the past 20 years, the number of imported vehicles has remained steady, despite drops during the 2008-2009 financial crisis and the COVID-19 pandemic.
Domestic production has varied significantly. At its peak in 1999, the U.S. produced over 12 million vehicles. Since then, production dipped, but it has shown a steady recovery as fuel prices stabilized and consumer confidence grew. However, numbers haven’t returned to the highs of the early 2000s.
For many buyers, the origin of their vehicle isn’t a major concern. Frank Krieber, a retired tech executive, bought a Chevrolet Tahoe believing it was an American vehicle. While it is assembled in Texas, over a third of its parts are made in the U.S., and a similar amount come from Mexico. Krieber stated, “I don’t mind the Mexican content.” He emphasized that he would have purchased the car regardless of its assembly location.
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International Trade and World Market,Automobiles,Protectionism (Trade),Customs (Tariff),Mexico,Canada,Trump, Donald J
