A couple of weeks ago, U.S. President Donald Trump announced 25 percent tariffs on imported automobiles that later took effect on April 3rd, with additional levies on imported parts including things like engines, transmissions, and electrical components set to join them no later than May 3rd. Though Trump recently opted to pause reciprocal tariffs on most countries for 90 days as the White House negotiates new deals, Ford and other automakers weren’t spared. Now, Ford is among the automakers facing the biggest hit from retaliatory tariffs imposed by Canada, too.
According to Bloomberg, Canada has imposed retaliatory tariffs following Trump’s own levies on that country, which vary based on the source of the components present in imported vehicles. Components from Mexico are exempt, meaning that the tariffs are based squarely on the percentage of parts that come from the U.S. Since Ford, General Motors, and Stellantis have the largest portion of Canadian new vehicle sales that rely on U.S. imports, the Detroit Big Three stand to be impacted the most.
Ford is in line to be impacted more than any of its peers, however, given the fact that 80 percent of its Canadian sales stem from U.S. imports, followed by GM and Stellantis at 65 percent each. Additionally, vehicles that are assembled in the U.S. that not made and shipped under the rules of the current U.S.-Mexico-Canada Agreement will be subjected to the full 25 percent tariff. As a result of these levies, the cost of vehicles is expected to increase by around $4,700 to $12,000 in Canada, and Stellantis has already temporarily shut down production at its plant in Ontario, citing uncertainties pertaining to these levies.
In the meantime, Ford has resigned to the fact that it will have to pay tariffs on imported vehicles and major components, but has been lobbying the Trump administration to reduce levies or remove them completely from low-cost parts made in countries with cheaper labor – something that it claims would add billions in costs. The automaker is also taking steps to try and mitigate the impacts of these tariffs, which are also having an impact on the stock market – analysts continue to adjust their price targets for Ford stock downward, including, Bernstein, which just cut its price target by $2.40 to $7.
Comments
Better start negotiating instead of fighting. 80% exported to usa? Not exactly dealing from a position of strength are we? We could more than make up the shortfall by selling billions in natural resources to other countries. Oh wait, that’s never going to happen with carbon carney at the helm.
Dan, it’s manufacturing. The U.S. is good at a lot of things, but not everything. Largely because emerging markets, i.e., foreign entities have to invest in NEW everything to make their economies function. So, what will they invest in? New technologies. It’s a known fact, at least if you understand how business models work, that sometimes it just makes economic sense to purchase certain parts of one’s supply chain from elsewhere. It’s less expensive than building factories for everything, then paying the associated higher labor rates. This keeps many products at reasonable prices for the average consumer, and lessens the manufacturing burden. The current global tariffs will not accomplish this certainly in the near term, and in certain instances, not the long term either.
Ford can weather this storm if they increase their prices 50% more than maximum tariffs. Then, offer semi-employee pricing where as Ford and customer each contribute to maximum discount on certain vehicles, not all. To do this is economically feasible, at least for the foreseeable future.