President Trump yesterday reiterated that he will impose a 25% tariff on all goods from Mexico and Canada on March 4. A new analysis from a prominent auto industry economics firm says the move could raise some car prices by as much as $10,000.
Reuters reports, “President Donald Trump said his proposed 25% tariffs on Mexican and Canadian goods will go into effect on March 4 as scheduled because drugs are still pouring into the U.S. from those countries.”
Trump’s justification for the tariffs has shifted over time, sometimes focusing on migrants and other times on reports of drug smuggling. The New York Times notes, “Last year, U.S. Customs and Border Protection agents intercepted about 19 kilograms of fentanyl at the Canadian border, compared with almost 9,600 kilograms at the border with Mexico.”
He initially proposed to enact the tariffs in February, later delaying them to March. That move has kept analysts guessing as to whether the new deadline is real.
Pushback From Business, Political Allies
Should the tariffs happen, Ford CEO Jim Farley has said, they would “blow a hole in the U.S. industry that we have never seen.”
Even the staunchly conservative Wall Street Journal editorial board this week wrote, “If the goal is to harm U.S. autoworkers and Republican prospects in Michigan, then by all means go ahead, Mr. President.”
One of Four Sets of Auto Industry Tariffs Threatened
Tariffs on Canada and Mexico are one of four sets of tariffs Trump has threatened, each of which could contribute to increased car prices.
In addition to the levies on America’s neighbors, Trump has threatened new tariffs on aluminum and steel — the primary materials used in vehicle production. Those could take effect March 12.
He has threatened tariffs specific to the auto industry, as high as 25% on all imported cars but designed to “go substantially higher over the course of a year.” Those could begin on April 2.
He has threatened “reciprocal tariffs” on American trade partners, meaning the U.S. would match any tariff a country places on U.S. goods. Those have no specific effective date, as Trump asked White House officials to study the issue and make recommendations soon.
“Kevin Hassett, the top White House economic adviser, told CNBC television that Trump would determine new tariffs after a study is completed by April 1,” Reuters explains.
Economist: Mexico/Canada Tariffs Worse Than a UAW Strike for Shoppers
No economist has yet published a study predicting the effect of three of the four rounds of tariffs. However, several groups have studied the possible impact of levies on Canada and Mexico, likely because that was Trump’s first threat, giving researchers more time to explore it.
Two early analyses, one from U.S.-based Wolfe Research and one from Canada’s T.D. Economics, each concluded that the move would raise the price of the average car by $3,000.
However, a deep analysis of the move’s impact is complex because car part supply chains are meshed between the three countries. There are no purely American cars. Many cars sold in the U.S. are built in Canada or Mexico, and vehicles assembled in the U.S. all use Canadian or Mexican parts.
Many parts cross a border more than once before finding their way into a finished car, and would see their prices rise by 25% with each crossing.
That makes calculating the impact of the tariffs complex. Anderson Economic Group (AEG), a consultancy that studies the auto industry, recently finished a more detailed analysis of the tariffs’ possible impact on prices.
CEO Patrick Anderson told the Detroit Free Press, “It’s almost $9,000 per car for a full-size SUV with substantial Mexican content.” He added, “If you don’t make production adjustments or shut down lines, it could be above $10,000.”
Reports this week suggest automakers are pausing some plans to study the tariffs. Ford has reportedly told suppliers it may delay the launch of its next F-150 pickup, the best-selling vehicle in the U.S.
The tariffs would impact the auto industry more than last year’s record-breaking United Auto Workers strike, AEG told the Free Press.
Insurance Rates Would Increase, Too
A separate study found that car insurance rates, already soaring in recent years, will spike further under the tariff plan.
Insurify, an insurance shopping service, found that “tariffs would contribute to the national average cost of full-coverage car insurance increasing 8% by the end of 2025, from $2,313 to $2,502.”