Brace yourself for a surge in car prices—American consumers could soon be paying an extra $3,000 per vehicle as former President Donald Trump’s 25% tariffs on Canadian and Mexican imports take effect. With nearly a quarter of a trillion dollars in trade at stake, the entire North American auto industry is scrambling to respond to the chaos.
Trump’s decision to impose the tariffs, citing trade deficits and border security concerns, is set to send shockwaves through automakers and suppliers across the continent. The duties will hit not only the 16 million vehicles sold annually in the U.S. but also the vast network of parts and components essential to their production. Analysts warn that the additional $60 billion in costs could cripple manufacturers, with the burden likely shifting to consumers already struggling with record-high vehicle prices.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, didn’t mince words: “The auto sector is going to shut down within a week. At 25%, absolutely nobody in our business is profitable by a long shot.”
Automakers in Mexico had anticipated the move, rushing to stockpile vehicles and components, but industry leaders say this will only delay the inevitable. Guillermo Rosales, head of Mexico’s Automotive Distributors Association (AMDA), warned that the long-term impact depends entirely on Trump’s next steps. “Everything depends on the course that the Trump administration takes in this matter,” he said.
The auto supply chain is deeply intertwined, with some components crossing U.S. borders up to eight times during manufacturing. The tariffs will force companies to either absorb massive losses or pass them down to consumers—adding thousands to sticker prices. “Who is absorbing the price?” asked Aruna Anand, CEO of Continental AG’s North American division. “Are we able to absorb that price, or is it going to be shifted to the end consumer?”
Since Trump’s first presidency, automakers have been required to use more North American-made parts, but the new tariffs dismantle previous trade agreements, throwing the industry into disarray. In cities like Detroit, Windsor, and manufacturing hubs across Mexico, the fallout could be catastrophic. Union leader John D’Agnolo painted a grim picture: “We’re talking about thousands and thousands of jobs being lost. We’d truly be a ghost town here in Windsor if we lost this type of business.”
Canadian officials predict that over 500,000 jobs could vanish in Ontario alone, as manufacturers struggle to comply with the costly new trade rules. In the U.S., Trump has championed the tariffs as a way to revive American manufacturing, but industry experts say it will take years—if not decades—to build a fully domestic supply chain.
General Motors, the largest U.S. automaker, is racing to adjust, with CEO Mary Barra stating, “We are working across our supply chain, logistics network, and assembly plants so that we are prepared to mitigate near-term impacts.” However, the company has no plans for a major shift in production unless it makes long-term financial sense.
In Mexico, Francisco González of the National Auto Parts Industry Association warned that the country’s booming auto sector could see zero growth in 2025, with the burden of tariffs quickly making its way to customers. One supplier described the tariffs as a financial disaster: “Our margins on certain parts made in Mexico are just 2% to 10%. With a 25% tariff, we’re looking at instant losses of up to 23% per component.”
Trump has defended the tariffs, claiming they will prevent China from sneaking cheap goods into the U.S. through Mexico. Mexican President Claudia Sheinbaum has vowed to retaliate, placing tariffs on Asian imports while investing in local production. However, industry insiders argue that fears of Chinese components flooding the U.S. are exaggerated—less than 3% of Mexico’s auto parts come from China.
Meanwhile, Canada is fighting back with its own 25% tariffs on $106 billion worth of U.S. goods. Outgoing Prime Minister Justin Trudeau’s government has been securing major investments in electric vehicle production, drawing billions from automakers like Honda and Volkswagen to build battery and assembly plants in Ontario.
For small suppliers, the tariffs could be a death sentence. Laval Tool, a Windsor-based parts manufacturer, recently secured a deal to supply Tesla with Cybertruck molds—but CEO Jonathon Azzopardi says the tariffs will make it impossible to compete. “I’ll be paying a tariff for the steel to come in from the U.S. Then I’ll be paying a tariff when the mold leaves to go back into the U.S. It’ll make us uncompetitive, and we’ll lose business.”
A glimpse into the potential fallout came in 2022, when truckers protesting Canada’s COVID-19 lockdowns blocked the Ambassador Bridge between Detroit and Windsor. Within 24 hours, auto production shut down in Ontario, Michigan, Texas, and Missouri. “Automakers and suppliers would hold off on building high-tariff products,” said Michael Robinet of S&P Global Mobility. “We expect production and sales would go down.”
As the tariffs loom, the industry faces an uncertain future, with auto prices soaring, jobs on the line, and manufacturers scrambling for solutions.
