Canada and Mexico Tariffs Are a Major Problem for GM, Ford, and Suppliers if They Persist

The 25% tariffs on all US imports from Canada and Mexico began March 4. As discussed in our Nov. 26 note on General Motors GM and Ford Motor F, these tariffs are a punishment for what President Donald Trump calls inadequate measures these nations (and China) have taken concerning fentanyl and illegal immigration into the United States. Lately, White House rhetoric seems more focused on fentanyl than immigration. We consider these tariffs very bad news for our US autos coverage, but for now, we are leaving our fair value estimates in place.

It is unclear whether the tariffs will last a few days, months, or the rest of Trump’s term, so we will not immediately model a permanent shift in automotive manufacturing to the US and lower profits for 2025-28. It would cost automakers and suppliers billions of dollars to move capacity, and it is not yet clear how much of the tariffs will be absorbed by automakers, suppliers, and dealers.

Tier 1 suppliers have publicly said they are passing the costs along to automakers, but it is unclear how much (if any) of that will flow to dealers and consumers. We also think these tariffs could be lifted soon if Canada and Mexico take actions that satisfy Trump. There are separate 25% automotive tariffs due on April 2 that we think will apply to all imported autos, to target Korea, Japan, and Germany. Additionally, steel and aluminum tariffs start March 12.

Of GM and Ford, we see GM as more exposed to the March 4 tariffs, as it assembled 37% of its 2024 North American production in Canada and Mexico (mostly the latter), versus 17% for Ford. Ford is not immune, as it makes the Maverick, Bronco Sport, and 3.5L F-150 engines in Mexico. Ford also makes 7.3L V-8 Super Duty engines in Canada. Among suppliers, we see Adient ADNT as having high exposure due to cut-and-sew seating labor in Mexico. Meanwhile, Gentex GNTX has minimal direct tariff risk, with only about $10 million of wire harness sourcing in Mexico.