Automakers, Already Taking a Hit From Trump's Mexican Tariff Threat, Worry the Pain Has Only Just Begun

Steph Willems
by Steph Willems
automakers already taking a hit from trumps mexican tariff threat worry the pain

The profit-focused appeal of building vehicles in low-cost jurisdictions propelled many automakers to boost manufacturing capacity in America’s southern neighbor — a decision that now haunts them.

After President Donald Trump issued a Thursday statement declaring his administration would levy a 5 percent tariff on all Mexican-made goods starting June 10th, some $17 billion in market value evaporated from top automakers the following day. Ford, General Motors, and Fiat Chrysler all saw their share prices tumble. Should Trump follow through on his promise of an escalating tariff (a threat designed to stem illegal migration into the U.S.), the pain felt by both companies and their customers will be extreme.

Naturally, the industry is pushing back the best it can.

Models built south of the border are too numerous to list, but include regular and crew cab versions of the new-for-2019 Chevrolet Silverado and GMC Sierra, the Volkswagen Jetta and Toyota Tacoma, Chevrolet’s new Blazer, and Ram’s redesigned HD models.

A $1 billion BMW plant scheduled to open next week builds the next-generation 3 Series — a crucial model for Bimmer, and one with no shortage of similarly priced competition.

% of U.S.-sold vehicles assembled in Mexico (2019):

Volkswagen Group: 46.5%

Fiat Chrysler: 25.8%

General Motors: 24.3%

Nissan-Mitsubishi: 23.4%

Toyota: 11.1%

Hyundai-Kia: 11%

Ford Motor: 7.9%

BMW Group: 5.9%

Daimler: 3.8%

Subaru: 0%

Tesla: 0%

Volvo: 0%

Source: @LMCAutomotive

— Nathan Bomey (@NathanBomey) May 31, 2019

While the above list doesn’t show it, Mazda also produces U.S.-bound vehicles in Mexico. Honda, too.

In a statement, the White House said tariffs on Mexican goods would rise to 10 percent on July 1st if nothing is done to seal the border for illegal migrants, with the levy rising to 25 percent by October.

According to Bloomberg, Juergen Pieper, head of automotive research at Bankhaus Metzler, said BMW plans to slow the increase in output from its Mexican facility in response to the looming tariff. Once up to speed, the San Luis Potosi plant is expected to account for one-fifth of North American BMW production.

Deutsche Bank auto analyst Emmanuel Rosner claims a 25 percent tariff would cost the industry over $86 billion annually.

Mexico’s president, Andres Manuel Lopez Obrador, urged calm on Friday. In a statement to media reported by Reuters, Lopez Obrador said, “I tell all Mexicans to have faith, we will overcome this attitude of the U.S. government, they will make rectifications because the Mexican people don’t deserve to be treated in the way being attempted.”

Trump’s proposed tariffs earned a swift rebuke from the U.S. Chamber of Commerce, with Neil Bradley, the group’s executive vice president and chief policy officer, telling reporters, “We have no choice but to pursue every option available to push back.”

Nor are industry groups happy about the development. Jay Timmons, president of the National Association of Manufacturers, said the tariffs “would have devastating consequences on manufacturers in America and on American consumers.”

David Schwietert, interim head of the Alliance of Automobile Manufacturers, said in a statement, “Any barrier to the flow of commerce across the U.S.-Mexico border will have a cascading effect – harming U.S. consumers, threatening American jobs and investment.”

[Image: Fiat Chrysler Automobiles]

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  • PrincipalDan PrincipalDan on Jun 04, 2019

    Every time I think we've hit the bottom of the barrel around here you guys go find a new and deeper barrel.

  • Arthur Dailey Arthur Dailey on Jun 04, 2019

    I am not a Trump supporter (surprise), however I do agree that national borders should be 'secure', and that first world, democratic nations should not enter into 'free trade' agreements with autocracies, dictatorships and 3rd world nations. However corporations have no loyalty to a nation. Their sole loyalty is to profit. So the corporations will always lobby to increase their profitability. Marx predicted globalization and free trade over 150 years ago. And unfortunately corporations have the funds to 'influence' politicians. And thanks to lobby groups including the NRA, this will not end. Tariffs do cost the consumer, not the nation facing tariffs. Western Canadians denounced the tariffs that Canada had for over a century because they believed/knew that these tariffs meant they paid more for finished goods, and favoured Eastern Canadian manufacturers. If the USA wished to 'secure' it southern border it needs to enact some programs that the POTUS has not mentioned: 1) Decriminalize cannabis and possibly other drugs, thus taking them out of the control of gangs/cartels. 2) Incarcerate anyone found guilty of employing illegals. No exceptions. In 2005 this would have meant the senior executives of Wal-Mart which instead paid an $11 million fine for employing hundreds of 'illegal immigrants' as night cleaners. 3) Assist Mexico in securing its own southern border. Thus preventing the influx of refugees from Central America. 4) Stop the posturing and preening and once again become a trusted ally/partner with other 'western' style democracies. This will allow a united front against Chinese economic aggression. 5) Help to reduce/end the dependency on petroleum. This will curtail the income flowing into the Middle East and therefore reduce the funding for radical Islamization. 6) Build better vehicles in North America. It has been demonstrated that unionized North American workers can do a good job building reliable vehicles, in a cost effective manner if given properly designed and engineered vehicles. Oshawa won multiple quality awards yet those workers are still losing their jobs.

  • Jeff S I am not a fan of Tesla and they were niche vehicles but it seems that they have become more common. I doubt if I get an EV that it would be a Tesla. The electrical grid will have to be expanded because people over the long run are not going to accept the excuse of the grid can't handle people charging their EVs.
  • AMcA The '70 Continentals and Town Cars may have been cousins to the standard body Fords and Mercurys, they didn't have to be disguised, because they had unique, unbelievably huge bodies of their own. Looking at the new 1970 interior, I'd say it was also a cost savings in sewing the seat. Button tufted panels like the 1969 interior had require a lot of sewing and tufting work. The 1970 interior is mostly surface sewing on a single sheet of upholstery instead of laboriously assembled smaller pieces. FINALLY: do I remember correctly that the shag carpet shown under these cars was a Photoshop? They didn't really go so peak '70s as to photograph cars on shag carpets, did they?
  • Inside Looking Out Toyota makes mass market cars. Their statement means that EVs are not mass market yet. But then Tesla managed to make mass market car - Mode; 3. Where I live in CA there are more Tesla Model 3s on streets than Corollas.
  • Ltcmgm78 A lot of dirt must turn before there's an EV in every driveway. There must be a national infrastructure plan written by other than politicians chasing votes. There must be reliable batteries that hopefully aren't sourced from strategic rivals. There must be a way to charge a lot of EVs. Toyota is wisely holding their water. There is a danger in urging unplanned and hasty moves away from ICE vehicles. Do we want to listen to unending speeches every election cycle that we are closer than we have ever been to 100% electrification and that voting for certain folks will make it happen faster? Picture every car in your town suddenly becoming all electric and a third of them need a charge or the driver will be late for work. This will take a lot of time and money.
  • Kendahl One thing I've learned is that cars I buy for local errands tend to be taken on 1,000 mile trips, too. We have a 5-speed Focus SE that has gone on longer trips than I ever expected. It has served us well although, if I had it to do over again, I would have bought an ST. At the time of purchase, we didn't plan to move from 1,000 feet elevation to 6,500. The SE is still adequate but the ST's turbo and extra power would have been welcome.