Automotive sector becomes the main victim of Trump’s commercial war

The US tariffs to the automotive sector, including part of the production of Canada and Mexico, and the reciprocal measures announced Thursday by the Canadian Prime Minister, Mark Carney, make the world of the automobile the main victim of Donald Trump’s commercial war.

Julio César Rivas / EFE

This Thursday, 25 % tariffs entered the vehicles made from the United States, or the T-MEC of which Canada and Mexico are part, and that are imported to the country.

The measure especially affects German, Japanese and South Korean manufacturers. According to the official data of the US Department of Commerce, for example in 2024 the country imported German cars worth 25.6 billion dollars.

If you marked BMW, Mercedes-Benz or Volkswagen (VW) directly transfer the tariff at the price of their vehicles in US dealerships, these models will cost from today 25 % more than 24 hours ago.

VW has indicated that it plans to break down the price of the vehicle and the 25 % tariff in its models affected by Trump’s tariffs so that the US consumer understands the consequences of the commercial policy of the US president.

In addition, German manufacturers are considering increasing their production in the assembly plants they have in the US to avoid tariffs and reduce their impact on their results accounts.

Tariffs not only affect German brands. The Asian Toyota, Honda, Hyundai and Kia also exported in 2024 a considerable amount of vehicles that will now cost US consumers 25 % more.

In 2024, Japan exported to US vehicles worth 40,760 million dollars and South Korea worth $ 38,000 million.

However, Trump’s protectionism not only affects vehicles made of North America but also to parts which multiplies the negative impact of tariffs.

Exports in 2024 to the US of parts and motors from Germany, Japan and South Korea were respectively 35,500, 68,500 and 66,000 million dollars.

According to the T-MEC terms signed by Trump himself during his first term (2017-2021), so that a vehicle is included in the North American Free Trade Agreement must meet a series of requirements.

The most important is that at least 75 % of the content of the vehicle must have been produced in North America. Vehicles that do not meet that requirement are subject to tariffs when exported between the US, Canada and Mexico even though it has been manufactured in one of those countries.

In the United States, VW, BMW, Subaru and other brands have plants that produce vehicles made with less than 75 % of parts from North America.

As of this Thursday, those parts (from engines to suspensions) are appraised with a 25 %tariff, which will increase the manufacturing cost, an increase that manufacturers will have to decide if they pass to US consumers with a price increase.

Again, that measure not only affects foreign manufacturers. Stellantis has forced to temporarily suspend production on two assembly plants (one in Canada and another in Mexico) by the entry into force of tariffs.

And when stopping vehicles in these plants, production has also suspended production in the US work centers that provide parts with the temporal dismissal of some 900 people.

Vehicles made in Canada and Mexico with parts from outside North America are also being assessed as of today with tariffs when they are exported to the US.

In response to these tariffs on vehicles produced in Canada with parts from other countries, Canadian Prime Minister Mark Carney announced reciprocal levies for cars produced in the US and that do not comply with the rules of origin of T-MEC.

In practice, this commercial war assumes that, for example, the BMW X6 that the German brand produces in its Spartanburg plant, in South Carolina, now accumulates 25 % tariffs by the US for the components produced outside North America.

And when that vehicle is exported to Canada, another 25 % that today begins to apply Ottawa.