Ford Motor Company CEO Mark Fields this week warned that president-elect Donald Trump’s proposed 35 percent tariff on Mexican-made vehicles and parts imported to the US would have negative consequences for the US economy, according to the Toledo Blade. Prior to his election this month, Trump raised the possibility of imposing such a tariff on automakers from the campaign trail numerous times, usually in reference to Ford’s announcements regarding planned investments into Mexican production.
“A tariff like that would be imposed on the entire auto sector and that could have a huge impact on the U.S. economy,” Fields told reporters after giving a speech at the AutoMobility LA event this week.
Mexico is an appealing country of production for a lot of automakers due to its proximity to the US and its low wages; the Blade reports that labor generally costs about 80 percent less there than in the US. The North American Free Trade Agreement (NAFTA) allows companies to import products from Mexico duty-free, and the inexpensiveness of production there means that traditionally low-margin vehicles like small cars can be priced competitively and still create a profit.
Ford currently builds more passenger vehicles in the US than any other automaker – a fact that will likely continue to be true even after all its small-car production moves to Mexico, as two new products will be moved in to replace the Focus and C-MAX after they leave the Michigan Assembly Plant. But if the future President of the US were indeed to levy a tax against small cars built in – and imported from – Mexico, prices would rise, sales would likely decline, and Ford and other automakers might struggle to produce a profit in an already struggling segment.
“it’s very difficult for us to be able to make money on a vehicle produced in the US,” said Fields.