Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Investing.com – The repeal of the USMCA free trade agreement could significantly affect the North American auto industry, with the “Detroit 3” automakers—General Motors Company (NYSE: ), Ford (NYSE: ), and Stellantis NV ( NYSE). :)—to face the biggest challenges, according to Bernstein.
In a report released Saturday, Bernstein highlights the important role that Mexico and Canada play in the auto supply chain. More than 30% of the cars sold in the US come from these two countries, with Mexico being the largest contributor.
In addition, approximately 20% of the value of US assembled vehicles is based on imported parts. The removal of the free trade status will not only damage supply chains but will also result in higher tariff costs, especially for automakers that rely on Mexican production.
Bernstein’s analysis reveals that Detroit’s automakers are particularly vulnerable because of their heavy reliance on Mexican manufacturing.
“Due to the high level of production in Mexico and low exposure to other international markets that are not affected by the change in US tariffs, Detroit 3 will be one of the most affected OEMs,” analysts Daniel Roeska and Harry Martin said in the letter.
GM, for example, would have a lower reach of 2.6 percent of revenue, making it the hardest-hit automaker under this scenario.
Ford and Stellantis would face significant network pressures, while automakers with different production bases, such as European and Asian brands, would be less exposed.
Last month, President-elect Donald Trump vowed to impose large tariffs on Canada, Mexico and China, signaling a shift toward more aggressive trade policies that could cause friction with major U.S. trading partners. .
Trump announced plans to impose tariffs of 25% on imports from Canada and Mexico, linking the move to efforts to curb drug trafficking and illegal immigration. The move would likely violate the USMCA trade agreement, which facilitates tariff-free trade between the three countries.
In addition, Trump has proposed a 10% tariff on imports from China, on top of any existing duties. Although details remain unclear, the proposal follows earlier promises to revoke China’s most-favored status and impose tariffs of more than 60% on Chinese goods.
The US is a key market for Mexico and Canada, absorbing more than 83% of Mexico’s exports and 75% of Canada’s exports by 2023. Tariffs could also disrupt Asian auto and electronics firms which depend on Mexico as a production base for the US market. .
Trump, who originally signed the USMCA into law in 2020 after contentious negotiations, will have the opportunity to renegotiate in 2026 when a “date” clause allows for changes or withdrawal.
