The auto industry is bracing for impact after President Donald Trump confirmed Thursday that he will impose 25% tariffs on Canada and Mexico starting Saturday.

The promise, he said during a signing of executive orders related to a deadly airplane crash, is in response to illegal immigration, the flow of fentanyl and trade deficits with the countries. There weren't further details except that the administration is contemplating whether to exempt oil from the duties on the two neighboring countries, which are the domestic auto industry's biggest trading partners. Tariffs could increase the cost of materials, auto parts and vehicles that cross the border — which often happens multiple times in the assembly of a vehicle, compounding the duties.

“Even the threat of tariffs has the potential to be almost catastrophic,” said Bill Long, president and CEO of the Motor and Equipment Manufacturers Association.

General Motors Co. and Stellantis NV directed comment to the American Automotive Policy Council, a trade group that represents the Detroit Three. The organization has been advocating for exemptions for vehicles or parts for which manufacturers have invested to comply with the United States-Mexico-Canada trade agreement's rules of origin. It's argued the duties would reward those who opted against investing in North America and the United States under the terms signed by Trump in 2020.

“American Automakers have invested tens of billions of dollars to meet the USMCA’s stringent sourcing requirements," Matt Blunt, AAPC president and former Missouri governor, said in a statement, "and look forward to working with President Trump to preserve and strengthen U.S. auto manufacturing and North American competitiveness."

Ford Motor Co. didn't immediately have comment.

The auto industry imported close to $450 billion worth of goods from Mexico and Canada in 2023.

Trump's promise to institute the tariffs, an action he said he would take in November before being sworn into office, comes as affordability is the buzz word for the auto industry in 2025. Although 2024's sale nearly 16 million new vehicles showed a robust appetite by Americans for cars, trucks and SUV, manufacturers and dealers are under pricing pressure as interest rates limit dollar power and consumers have more options now that inventories have returned to more normal levels following the pandemic and parts shortages. Plus, automakers are seeking to continue investing into the electrified vehicle transition as China flies ahead in EV technology and manufacturing.

"If it’s placed on everything that’s manufactured in Canada and/or Mexico," said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions LLC, "that will be extremely painful for the auto industry, not just the manufacturers that have vehicles there, but the vast number of suppliers that ship parts back and forth across the border."

Short-term, companies might have to eat the levies, but if tariffs were to be imposed at length, then consumers could see vehicle prices increase, Fiorani said.

"Suppliers are not making so much money on these tariffs that they can absorb that cost," he said. "Some emergency patches are going to have to be put in place to keep the smaller supplier alive."

Speaking at the Washington, D.C., Auto Show shortly before the president’s latest tariff comment, leaders from across the industry warned — as many have since Trump first threatened tariffs on Nov. 26 — that new trade barriers could have an immediately devastating impact.

Long’s organization, a trade group representing U.S. vehicle parts suppliers, claims that auto parts production is the largest manufacturing sector in the United States.

“Our members have said that if tariffs were imposed on Canada and Mexico, it would shut down vehicle production," Long said during a discussion panel. “Because it only takes one supplier to shut down an entire production line for OE (original equipment) production, and that shutdown impacts all suppliers.”

Jennifer Safavian, president and CEO of the lobbying group Autos Drive America, shared similar concerns.

“For the auto industry, parts will pass back and forth across the border seven times, perhaps, before they’re a finished product,” said Safavian, whose organization represents foreign automakers like Toyota Motor Corp., Volvo Cars and others. "It could have significant impact on the U.S. auto industry and production of vehicles."

She also noted that the “devil will be in the details” as the specifics matter for the highly complex automotive supply chain.

With the actual making of vehicles and their parts in flux, industry leaders said the impact from tariffs will flow down to auto dealers and consumers at a moment of already high prices — with many labeling the current moment as an affordability crisis. The average new-vehicle transaction price is approaching $50,000, said Cody Lusk, who heads the American International Automobile Dealers Association.

“You add possibly $10,000 to a car being imported from wherever the tariffs hit,” he said. “It's a big deal.”

Automakers already have taken steps to do what they can at little to no cost to prepare for potential tariffs. GM Chief Financial Officer Paul Jacobson said this week the company has expedited imports of vehicles produced in Canada and Mexico to the United States.

With the exception of GM trucks, there aren't other plants in the United States that produce vehicles — from the Ford Maverick to the Chevrolet Equinox to the Chrysler Pacifica — mostly produced by the Detroit Three in those countries. GM CEO Mary Barra this week said some pickup capacity may be able to be added to U.S. truck plants, but she emphasized the need to protect cash flow, too.

"What we won't do is spend large amount of capital without clarity," Barra said about responding to potential tariffs during an investor call.

Fiorani said retooling for an entirely new vehicle can take a year or more. Even then, companies like Ford, which produces the most vehicles of the three in the United States, have less U.S. capacity available than others.

In Canada, GM produces light and heavy-duty trucks and Chevrolet BrightDrop EVs, as well as engines and transmissions. GM makes some of its light and heavy-duty trucks in the United States.

Ford makes the Bronco Sport, Maverick compact truck and the all-electric Mustang Mach-E in Mexico. Its Oakville Assembly Complex in Canada is currently idled but is slated to build Super Duty trucks in the coming years. Ford builds engines in both Canada and Mexico. It also has an electric powertrain center in Mexico.

Stellantis NV builds the Chrysler Pacifica minivans and new Dodge Charger Daytona electric muscle car in Canada. In Mexico, Stellantis builds the Ram heavy-duty trucks, the Ram Promaster van, the Jeep Compass small crossover and the Jeep Wagoneer S electric SUV. Stellantis also has engine and stamping operations in Mexico, and casting operations in Canada.

David Dauch, CEO of Detroit Tier 1 supplier American Axle & Manufacturing Holdings Inc., told The Detroit News this week the supply chain remains "fragile" from production disruptions and inflation over the past few years. AAM emphasizes manufacturing near its customers and has little exposure itself to Canada save from a handful of suppliers it's managed in the past. But insourcing and vertical integration all take time, Dauch noted.

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