(The Hill) – Carmakers in the U.S. and Europe could lose up to 17 percent of their combined annual core profits in a worst-case scenario if the U.S. imposes steep tariffs on Europe, and two key U.S. allies, Mexico and Canada, a report from S&P Global released Friday showed.
The report comes as President-elect Trump has threatened to impose 25 percent tariffs on all goods from Canada and Mexico, and increase tariffs on China.
U.S. automakers import billions of dollars in parts and products from Mexico, where many companies operate plants that work closely with U.S. counterparts. Tariffs on those products could cause steep increases on U.S. car prices after years of staggering increases following the pandemic.
The report warns that “Donald Trump’s re-election will likely intensify the headwinds the global auto industry will face in an already challenging 2025.”
According to the report, premium original equipment manufacturers such as Volvo and Jaguar Land Rover could be at higher risk of being exposed to higher tariffs due to their reliance on European production. General Motors and Stellantis are also more likely to be exposed to higher tariffs because of their reliance on production in Mexico and Canada, the report noted.
The companies could see more than 20 percent of their earnings before interest, taxes, depreciation and amortization at risk in 2025, the report said.
Meanwhile, exposure for Volkswagen and Toyota are not as high-risk, between 10 to 20 percent, and below 10 percent for BMW, Ford, Mercedes-Benz and Hyundai, the report added.
Trump’s tariff plans, which have been his preferred way of boosting U.S. manufacturing and pushing other countries for more favorable trade terms, have faced pushback from both Mexico and Canada, crucial allies of the U.S. Though, his latest tariff threat is aimed at forcing both Mexico and Canada to crack down on their borders with the U.S.
Mexican president Claudia Sheinbaum warned that the country will respond with its own tariffs if dialogue between the U.S. and Mexico fail. She said on Tuesday that talks are “the best path to achieve understanding, peace and prosperity for our two countries.”
Top Canadian economic officials also warned Trump against upsetting the “balanced and mutually beneficial” relationship between the U.S. and Canada, pointing out how much Canada imports from the U.S.
