President Donald Trump has gone ahead with 25% across-the-board tariffs against Canadian and Mexican imports, with a slightly lower rate against Canadian oil imports.
In retaliation, Canada has announced 25% tariffs against billions of dollars worth of American products, and plans to increase the spread of tariffs over the coming month.
The new policies leaves many industries in uncharted waters in a modern, global-trade era. The auto industry will likely be the first to feel the impact of this trade war, with Michigan and Ontario receiving the biggest blows.
According to Jamie Butters, executive editor of Automotive News, North America has a highly-integrated supply chain, which means it's harder to dismantle quickly and shift production. Butters pointed out that the tariffs apply not only to completed products, but to vehicle parts that move back and forth across the border multiple times, incurring multiple costs over the course of production.
The estimated cost to consumers, Butters said, is about $4,000 to $10,000 per vehicle.
"So that, you know, really prices a lot of people out of the new car market," Butters said.
These tariffs also include minerals that come across the border, which impacts the creation of electric vehicles, possibly including Elon Musk's Tesla.
Most auto industry CEOs tend to avoid partisan politics, because it can alienate large parts of their customer base, Butters said. Musk's political involvement has been "turning a lot of people away," all across the political spectrum.
"He's really changed the emphasis at Tesla away from growing the car brand," Butters said. "You know, for a while, his plan was to grow 50% a year until Tesla was twice as big as Toyota. Now, his focus really is on AI, and robots, and self-driving cars."
One of the administration's goals for these tariffs is increasing manufacturing in the United States. According to Butters, it seems unlikely that manufacturers would build new factories and shift operations to the United States, because the time to establish that would take more than this administration's term.
"The industry can't afford, you know, $60 billion to recreate those in the U.S.," Butters said. "And, it takes years to find a site to build a plant."
All in all, Butters said industry executives are hoping that these tariffs will be short-lived.
"The industry executives have mostly tried to, you know, whistle past the graveyard," Butters said. "They don't want to upset Trump and take his scorn directly."
Hear the full conversation with Jamie Butters on the Stateside podcast.
