Rapid response: US automotive tariff impact analysis

Beginning February 1, 2025, a 25% tariff on Canadian and Mexican value-added content for Light and Medium/Heavy Commercial Vehicles and Components has been floated by the new Trump administration. If the tariff is imposed, it is likely that Canada and Mexico will reciprocate
through an equal or ‘representative’ tariff in another sector. The US is utilizing a tariff threat to drive changes in border control and clampdown on illicit drug smuggling. It is not clear how long such a tariff may be imposed or what the metrics would be for relieving it. 

From a trade perspective, the overarching goal is to bring early changes to the USMCA trade agreement – and make it more favorable to the US. Currently, there are approximately 5.3m light vehicles built in Canada and Mexico, with 70% of these destined for the US.

Many US-built vehicles use Canadian or Mexican-sourced propulsion systems and component sets. Virtually no OEM operating under the USMCA is immune to these tariffs. A move that has long been signposted during campaigning, but we are now nearing the dawn of reality.
This analysis looks at mitigating actions and strategies available to the industry, together with an assessment of OEM exposure if tariffs are imposed.