Investing.com – The potential repeal of the USMCA could significantly impact the North American auto industry, with the “Detroit 3” automakers – General Motors (NYSE:), Ford (NYSE:), and Stellantis NV (NYSE:). 🙂 – Addressing the challenges that matter most, according to Bernstein.
In a report published on Saturday, Bernstein highlighted the critical role that Mexico and Canada play in the automotive supply chain. More than 30% of cars sold in the United States come from these two countries, with Mexico being the largest contributor.
Furthermore, approximately 20% of the value of vehicles assembled in the United States is based on imported parts. Removing free trade status would not only disrupt supply chains, but would also result in prohibitive tariff costs, especially for automakers that rely on Mexican production.
Bernstein's analysis reveals that Detroit automakers are uniquely vulnerable because of their heavy reliance on Mexican manufacturing.
“Given the significant exposure to production in Mexico and low exposure to other international markets that are not affected by the US tariff change, Detroit 3 will be among the OEMs most affected,” analysts Daniel Roesca and Harry Martin said in the note.
General Motors, for example, would see a profit margin of 2.6 percentage points on revenue, making it the hardest-hit automaker under this scenario.
Ford and Stellantis will face significant margin pressures, while automakers with diversified production bases, such as European and Asian brands, will be less at risk.
Last month, President-elect Donald Trump pledged to impose significant tariffs on Canada, Mexico and China, signaling a shift toward aggressive trade policies that could raise tensions with the United States' largest trading partners.
Trump announced plans to impose a 25% tariff on imports from Canada and Mexico, linking the measure to efforts to reduce drug trafficking and illegal immigration. The move would likely violate the U.S.-Mexico-Canada Trade Agreement (USMCA), which facilitates duty-free trade between the three countries.
In addition, Trump proposed imposing a 10% tariff on imports from China, on top of any existing duties. Although the details are still unclear, the proposal follows previous promises to revoke China's most favored nation status and impose tariffs exceeding 60% on Chinese goods.
The United States is the main market for both Mexico and Canada, absorbing more than 83% of Mexican exports and 75% of Canadian exports in 2023. Tariffs could also disrupt Asian automakers and electronics companies that rely on Mexico as a manufacturing hub for the US market. . .
Trump, who originally signed the USMCA into law in 2020 after contentious negotiations, will have the opportunity to renegotiate the deal in 2026 when a “sunset” clause allows for modifications or possible withdrawal.
