How Trump's Tariffs Will Crush American Carmakers

In the whirlwind of activity in his first few weeks in the White House, Donald Trump has sought to remake the world to his advantage by blowing up alliances and trading relationships that took decades to build.

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His latest attempt to bend America's allies to his will came on March 4th, in the form of tariffs of 25% on imports from Mexico and Canada, originally due to take effect a month earlier.

The tariffs will hurt the neighbours, but they are also a blow to car-making in America, an industry of both economic heft and outsize cultural significance. They will push up the price of the mode of transport that Americans hold most dear.

The consequences of slamming the brakes on free trade across American borders are potentially immense. Fords were first assembled in Canada 120 years ago; the firm opened a factory in Mexico two decades later. The connections gathered pace with a free-trade deal with Canada in 1965; Mexico was added in the North American Free-Trade Agreement in 1994. (NAFTA was replaced by the United States-Mexico-Canada Agreement in 2020.) Last year 3.6m cars, around half of America's imports by value, arrived from its two neighbours; some 2.5m of them came from Mexico.

It is not only finished cars that make the journey. Along the industry's highly integrated, complex supply chains, parts cross the borders up to half a dozen times as they are made up, stage by stage, into larger components.

Together cars and parts are vital to America's trading partners, accounting for 31% of all Mexico's exports to America, worth around $150bn, and 14% of Canada's, valued at over $55bn, according to Barclays, a bank. Those exports also make up a big chunk of the American market. Cars made in Mexico accounted for 15% of sales by volume in America in 2024 and those made in Canada nearly 7%; together they made up 16% of sales by value. It is quite likely that every car made in America contains components made in one of the two countries.