section_path: Multinational tariffs/Automobile and auto part tariffs
section_name: Automobile and auto part tariffs
paragraph_text: Automobile and auto part tariffs
  
  In January 2025, President Trump announced broad tariffs on Canada and Mexico, threatening the highly integrated North American auto supply chain. Due to decades of free trade agreements including USMCA, factories in the US, Canada, and Mexico grew accustomed to shipping auto parts back and forth multiple times during the manufacturing process. The three largest US automakers— Ford, General Motors, and Stellantis —lobbied for exemptions, warning the tariffs would hurt American companies more than foreign competitors. Ford CEO Jim Farley warned investors, "Long term, a 25% tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen." Trump agreed to delay tariffs on USMCA-compliant vehicles. Still, non-USMCA compliant brands manufacturing in Canada or Mexico, such as BMW, were affected starting March 4, 2025. BMW chose to cover these tariffs until May 1, 2025.
  
  The USMCA exemption closed on April 3, when Trump imposed a new 25% tariff on all imported cars, including those from Mexico and Canada. Economist Arthur Laffer estimated car prices would increase by $4,711, compared to $2,765 if the USMCA exemption remained available. The White House argued the move would boost domestic manufacturing and generate $100 billion in tax revenue, noting that about 50% of the 16 million cars bought by Americans in 2024 were imported. The same day, Stellantis announced it would temporarily close factories in Canada and Mexico and lay off 900 American employees as it assessed the impact of tariffs.
  
  Trump announced some relief after US automakers requested more time to move their supply chains. While the 25% tariff extended to auto parts on May 3, Trump exempted parts made in Mexico or Canada that were compliant with the USMCA. On April 29, he exempted carmakers who pay a 25% on imported cars from paying other tariffs, such as those on steel and aluminum. He also provided a rebate on a proportion of tariffs paid for the next two years. In May, US automakers criticized Trump's first trade deal for making it cheaper to import a car from the UK than one of their cars assembled in Mexico or Canada using US parts.