Trump’s New Auto Tariffs Threaten North American Trade, Raise Car Prices

MEXICO CITY — U.S. President Donald Trump’s decision to impose new tariffs on imported vehicles is rattling the foundations of North American trade, potentially disrupting decades-old supply chains and increasing costs across the auto industry.

Experts warn the tariffs, aimed at protecting American jobs, could backfire by straining the highly integrated manufacturing network created under the United States-Mexico-Canada Agreement (USMCA), and its predecessor, NAFTA.

“We’ve spent 30 years building a complex, cross-border supply chain. These tariffs put all of that at risk,” said Juan Francisco Torres Landa of Hogan Lovells in Mexico.

Auto parts often cross borders several times before final assembly, and even a single car key can contain over 50 parts from more than 20 global suppliers.

Although vehicles assembled in Mexico or Canada may be partially exempt based on U.S.-made component levels, compliance checks could increase costs and delay production, said political risk firm EMPRA.

Economic Impact on Mexico

Mexico, a major auto exporter with strong U.S. trade ties, is especially vulnerable. Home to major manufacturing plants for Ford, GM, Toyota, and others, Mexico exports about 3 million vehicles annually to the U.S.

The tariffs arrive at a challenging time, with 2025 economic growth projections already downgraded to 0.81%. “Trade uncertainty affects investment and output in key sectors,” said Valmex economist Geronimo Ugarte.

USMCA on Shaky Ground

Both Canada and Mexico say the tariffs violate the spirit of the USMCA. Mexican President Claudia Sheinbaum called for the removal of tariffs, saying they undermine the agreement’s core principles.

Experts fear the U.S. may be moving away from formal treaties to informal, direct negotiations—potentially weakening regional cooperation.

Higher Prices for U.S. Consumers

Analysts warn American car buyers will likely bear the brunt. Ostrum Asset Management’s Philippe Waechter predicts prices could rise by $3,000 per vehicle, potentially pushing new cars into luxury territory.

“Tariffs might push consumers to delay purchases or opt for used vehicles,” said Capital Economics.