Contentious customs disagreement: the subtle aspirations of American automakers
In the ever-evolving landscape of international trade, U.S. automakers like Ford are grappling with the significant impact of tariffs, particularly those imposed on imported vehicles and parts. According to Ford, building an SUV in the U.S. costs approximately $5,000 more than in Japan due to tariffs, a disadvantage that could cost the company about $2 billion in lost profit by 2025[1][2][4].
The Trump administration's imposition of a 25% tariff on imported vehicles and parts from Canada and Mexico has been a major contributing factor to this predicament. Many parts cross borders multiple times, causing tariff "stacking," which raises costs further[1]. As a result, Ford has had to suspend its full-year profit guidance and suffered a first quarterly loss since 2023, with tariff-related expenses of $800 million in Q2 2025[2].
The higher costs from tariffs act like a tax, raising vehicle prices and squeezing profits. These increased prices also drive up used car prices, leading to lower sales and production volumes overall, thereby threatening American manufacturing jobs[1].
Not all U.S. automakers share the same sentiment towards tariffs. While Ford is in weekly contact with the U.S. government regarding tariffs, BMW CEO Oliver Zipse considers the tariff debate as exaggerated. Zipse explains that the effects for BMW almost cancel each other out[3].
Canada, an important supplier of steel and aluminum for U.S. automakers, and the EU have abolished their auto tariffs on imports from the U.S., offering a potential solution to the problem[4]. However, the trade deal with the EU is still not detailed and could be renegotiated.
Meanwhile, large auto parts plants have been established in Mexico, further complicating the trade dynamics within the North American Free Trade Zone, where U.S. automakers face disadvantages[5].
In response to the complaints of the automakers, the U.S. government could potentially take action. Treasury Secretary Steven Mnuchin hopes for a quick aluminum deal with Canada[6]. However, the special tariffs on steel and aluminum from abroad remain at 50 percent, adding to the challenges faced by U.S. corporations like Ford and GM[7].
In conclusion, tariffs remain a significant cost pressure and competitive disadvantage for U.S. automakers in 2025, with broader implications for U.S. automotive supply chains and market dynamics. The complex global supply chains limit the benefits of tariffs, as U.S. automakers still rely heavily on imported parts subject to these tariffs[3]. The ongoing tariff debate underscores the need for a balanced approach to trade policies that considers the impact on domestic industries while maintaining global competitiveness.
References:
- Ford estimates $2 billion in lost profit due to tariffs
- Ford suspends full-year profit guidance due to tariffs
- Tariffs and their impact on U.S. automakers
- Canada and EU abolish auto tariffs on U.S. imports
- U.S. automakers face disadvantages in trade with Mexico
- Treasury Secretary Mnuchin hopes for a quick aluminum deal with Canada
- Special tariffs on steel and aluminum from abroad remain at 50 percent
- What about the impact of tariffs on other industries, like finance or transportation, given the higher costs for imported vehicles and parts?
- The ongoing tariff debate in politics is not only significant for the automotive business but also for the general-news, as it affects everyone driven by vehicles.
- With auto companies facing substantial costs due to tariffs, one might wonder how this affects other sectors that rely on automotive parts, such as the broader manufacturing and business industries.
- As tariffs continue to impact the automotive industry and affect supply chains, it could potentially have consequences on countries' economic stability and workforce, such as job losses in the transportation sector.
