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Made in Mexico, made for USA: Cars under scanner after Donald Trump's tariff threat
Donald Trump is set to slam brakes on popular US car models that trace origins to Mexico by hiking tariff rates.
US President Donald Trump has a two-barrelled gun pointed straight towards southern neighbours Mexico and northern ally Canada with threats of a hike in tariffs on several items imported into the US. And the list is primarily highlighted by passenger vehicles with Mexico as one of the largest exporters of cars to the world's second-largest vehicle market.
In 2024, Mexico exported 28 lakh units of light vehicles to the US. This was around 80 per cent of all its vehicle exports in the year, and a record. Major carmakers like Honda, Nissan, Toyota, Stellantis, Volkswagen and even American auto giants like General Motors and Ford manufacture several models in Mexico and then export these to markets in the north. But why?
(Also read: German carmakers say Trump tariffs would hurt consumers and industry)
Mexico has emerged as a major automotive hub for various reasons. It is centrally located and it is easy to export cars from here to the US. Labour costs are competitive while a skilled workforce and decent infrastructure are crucial factors that have made the country a near-ideal base to establish factories in. Volkswagen's Audi plant is in San Jose Chiapa. BMW's plant is in San Luis Potosi. Ford has three plants in the country. GM has four plants here. The Honda factory in the country has an annual production capacity of around 18 lakh units. And there are many others.
(Also read: UK worried, EU cautious, China unfazed as Trump's tariff threat looms)
In recent times though, several carmakers have had to re-align plans and re-strategise because while manufacturing in Mexico may have been lucrative for years, Trump in his first term as US President and now once again has threatened high tariffs on imported vehicles.
Why is Donald Trump targeting imported vehicles?
Just a few days ago, Trump imposed 25 per cent tariff on several goods imported into the US from Mexico and Canada. The list included cars. And while there has now been a brief pause of 30 days on imposition of the new tariff, carmakers remain concerned. So why is Trump slamming the brakes on imports?
Trump's entire campaign in the run-up to his race to White House was primarily based on the battle cry of MAGA - Make America Great Again. And under the MAGA political slogan, the business tycoon-turned-politician has promised job creation, bolstering production capabilities and more. 'America first," he has said repeatedly while highlighting what he believes is unfair trade practices by many countries across the world. And at a time when he claims he is also looking at protecting the American automobile industry, high tariff - reciprocal, says Trump, could hit carmakers importing vehicles into the US.
Which cars are made in Mexico for US?
In 2024, Mexico manufactured around 40 lakh units of cars, an increase of approximately five per cent from the previous year. As previously mentioned, more than half of these were exported to the US. A small fraction was also exported to Canada and Germany while the remaining was sold in the domestic market.
Specific to the US, a number of highly popular cars among American buyers find their origins in Mexico.
From Honda HR-V, Nissan Sentra, Chevrolet Blazer, Ford Maverick to even BMW 3-Series and many more, many of the cars that are a common sight on US roads are manufactured in Mexico. And this is exactly what Trump says he is looking to target.
Not many are sure what path carmakers may be compelled to take now as Trump embarks on his ‘shock and awe’ trade tactics. While a number of automotive companies have either started or outlined plans of establishing/increasing manufacturing bases in the US, others are looking at hiking prices of their respective car models if the tariff hike in the US forces them to do so.
