US automakers warn Trump’s Mexico tariffs will push up car prices

The U.S. auto industry, already battered by slumping sales and layoffs, is bracing for higher costs after President Trump’s threat to impose tariffs on all imports from Mexico.

Trump announced Thursday he would slap punitive levies of 5% on all Mexican goods because of the country’s “passive cooperation in allowing” illegal immigrants and drugs to cross the southern border.

The duty will take effect June 10, and if Mexico doesn’t take steps to alleviate what Trump called the “illegal migration crisis,” it will increase by the same amount each month until reaching 25% in October.

“Mexico must step up and help solve this problem,” the president said in a statement. “For years, Mexico has not treated us fairly — but we are now asserting our rights as a sovereign nation.”

While Trump has threatened before to exert economic pressure on Mexico to force its help fighting illegal immigration, Thursday’s move prompted alarm from auto industry trade groups.

Tariffs are “harmful to our nation’s economy and the millions of American jobs that depend on cross-border trade,” said David Schwietert, interim president of the Auto Alliance, a trade group representing companies behind 70% of all U.S. auto sales.

“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, curtailing economic progress that the administration is working to reignite, and potentially stalling efforts to ratify” the U.S.-Mexico-Canada agreement, Trump’s replacement for the Clinton-era North American Free Trade Agreement, Schwietert said in a statement.

In 2018, the U.S. brought in $346.5 billion in goods from Mexico, including $93 billion in vehicles. The U.S. imported $59.4 billion in automotive parts.

Because major auto manufacturers import a “considerable portion” of vehicles sold in the U.S. from Mexico, the tariffs could “cripple the industry and cause major uncertainty,” Deutsche Bank warned in a new analysis.

The lender estimated General Motors and Fiat Chrysler would see the worst damage to their bottom lines if tariffs hit 25%, and found the levies would raise the price of vehicles sold in the U.S. by an average of $1,300.

Trump’s latest duties come as the administration seeks congressional approval for the USMCA, an effort complicated by his party’s loss of its majority in the House of Representatives during November’s midterm elections.

Former Missouri Gov. Matt Blunt, president of the American Automotive Policy Council, which represents Fiat Chrysler, Ford, and GM, said in a statement the USMCA “relies on duty-free access to be successful.”

“The imposition of tariffs against Mexico will undermine its positive impact and would impose significant cost on the U.S. auto industry,” Blunt said.

Despite the pain Trump’s tariffs could inflict, as well as opposition to the move trickling out from Republicans in Congress, the president has doubled down on his decision.

Taking to Twitter, Trump said companies will leave Mexico for the U.S. to skirt the duties and accused Mexico of taking 30% of the U.S. auto industry.

“Mexico must take back their country from the drug lords and cartels,” he tweeted. “The tariff is about stopping drugs as well as illegals!”

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