According to Bloomberg, the U.S. tariffs on Canadian and Mexican products could cause U.S. auto prices to rise up to $12,000 and wreaking havoc on the North American supply chain.
After the U.S. taxes on Canadian and Mexican products, the cost of producing a crossover utility vehicle will increase by at least $4,000, and the cost of electric vehicles can increase up to $12,000, and those costs are likely to be passed on to consumers, according to a new study by Anderson Economic Group, a Michigan auto consulting firm.
“This cost increase will be direct – and I expect almost immediately – to lead to a drop in sales for some models,” Anderson Economics CEO Patrick Anderson said in an interview. Even before the tariffs were imposed, the average selling price of cars in the U.S. market was close to $50,000, up more than 20% from five years ago. It is reported that best-selling models affected by tariffs include Chevrolet Silverado pickup trucks and Ford Bronco Sport SUV models.
Bloomberg reported, citing people familiar with the matter that executives from GM, Ford and Stellantis communicated online with the U.S. Department of Commerce last week, warning that the proposed tariffs would have serious economic consequences. Among them, Ford and Stellantis executives stressed that the White House should focus on millions of imported cars that do not adopt U.S. parts. Consumers in the U.S. may find some models disappear completely as automakers will stop producing models with severely squeezed profits.
Anderson Economics Group’s research found that a large SUV with “large amounts of” Mexican parts will rise by nearly $9,000, while a pickup with “large amounts of” Mexican parts will rise by $8,000.
Dan Hearsch, head of America’s automotive business at consulting firm AlixPartners, said that even if the U.S. new car market sees a smaller price increase, U.S. car sales may drop by 500,000 as automakers will stop producing some models in Canada and Mexico and transfer as much production to U.S. factories, and “some models that cannot be produced in the U.S. may not be produced for the time being.” Anderson said that “some models and configurations will disappear directly.”
Meanwhile, automakers are increasing inventory to ease the impact of tariffs. For example, Ford’s engine factory in Windsor, Ontario is stepping up shipping products to the United States to cope with upcoming tariffs. The company has been searching for warehouses in the United States to store finished engines and parts for the past month. Automakers are also urging parts suppliers to increase their inventory and quickly ship parts to U.S. warehouses.