Zhixun Finance App noted that USA President-elect Trump plans to impose a 25% tariff on all autos imported from Mexico and Canada, which may affect the profits of American auto manufacturers, especially General Motors (GM.US), and raise prices for SUVs and pickup trucks aimed at American consumers.

General Motors leads the auto manufacturers exporting autos from Mexico to North America. According to data from the Mexican Automotive Industry Association, the top ten auto manufacturers with factories in Mexico produced a total of 1.4 million cars in the first six months of this year, with 90% of the cars sold to the USA.

Other Detroit manufacturers may also feel the pain: Ford (F.US) and Stellantis (STLA.US) are the largest US producers in Mexico after General Motors, with GM's stock price falling on Tuesday, the second day after Trump's tariff announcement. Earlier on Tuesday, European autos and auto parts were the worst-performing sector in Europe, dropping by 1.7%, while the Stoxx 600 index fell by 0.7%.

According to data from the business analysis company GlobalData, General Motors is expected to import over 0.75 million autos from Canada or Mexico this year, with the majority being produced south of the border.

This includes some of General Motors' most popular models, such as nearly 0.37 million Chevrolet Silverado or GMC Sierra full-size pickups and nearly 0.39 million midsize SUVs.

General Motors' factories in Mexico also produce two key new electric autos, the battery-powered versions of Equinox and Blazer SUVs. These General Motors models and other models have become targets of another anticipated policy by Trump: ending the $7,500 electric auto subsidy.

Kenneth Smith Ramos, former Chief Negotiator of the US-Mexico trade agreement, stated that this move may harm the interests of the United States and its North American trade partners.

"The United States is shooting itself in the foot," he said. The impact on the Mexican auto industry will also be "very negative".

General Motors has 0.125 million employees in North America; a decrease in car sales manufactured in Mexico could harm its profits in the entire region, potentially putting pressure on employment in both the United States and Mexico.

Increased tariffs will also draw attention to the supply chain, which tightly links the three member countries of the US-Mexico-Canada agreement. Mexico and Canada account for over 50% of US auto parts exports, shipping nearly $100 billion in parts. Imposing tariffs will increase costs for all cars assembled in the United States.

Tariffs, drugs, and immigration issues

The huge impact of Trump's threat to impose tariffs on Mexico and Canada has raised questions about what the incoming government is trying to achieve economically, and the potential collateral damage to US companies and consumers.

Trump called this a punishment for unrelated immigration and fentanyl drug trafficking issues, posting on social media that tariffs will continue until Mexico and Canada stop what he calls the "invasion" of "illegal aliens".

Trump mentioned drug and immigration issues, leading some analysts to predict that tariffs are more of a negotiating strategy rather than a genuine policy proposal.

Thomas Ryan, a macroeconomist at Caiqiu North America, said: "Given that Trump clearly mentioned the flow of people and drugs at the South-North border, this specific tariff threat appears to be more of a negotiating tool than a means of increasing revenue."

He added: "This opens the door for Canada and Mexico to present credible plans in the next two months to try to avoid these tariffs."

Mexican President Claudia Sheinbaum called for dialogue with Trump, warning that the proposed tariffs lack "reasonable" and will exacerbate inflation, stifling job opportunities in both countries. She also mentioned the possibility of retaliation, but considering Mexico's significant exports to the United States, the Mexican economy remains more vulnerable to the impact of tariff threats.

In theory, Trump's import taxes could also prevent Chinese auto manufacturers from using Mexico to bypass the high tariffs imposed by the United States on Chinese electric vehicles, but these imports have already been effectively blocked by other trade barriers in the United States.

Impact on consumers

With free trade with the United States, first in the form of the North American Free Trade Agreement, then the USMCA, Mexico's nascent automotive industry transformed into the country's most important manufacturing sector and a model of its export strength. But after 30 years of the North American Free Trade Agreement, Trump has put all of this in jeopardy.

In the competitive automotive and truck production sector, a 25% tariff could hit the Mexican automotive industry closely integrated with the United States for many years, with nearly 80% of the cars manufactured in Mexico being sold to the United States.

Higher tariffs will also impact American consumers. While companies importing goods directly into the United States pay tariffs, this cost inevitably gets passed on to consumers through higher prices.

"Tariffs work like this. Even though the Trump administration may want to say that Mexico is paying... ultimately, consumers will bear all of this," said Sudip Suman, managing partner at consulting firm Arrow Electronics Inc.

This could hit many pickup trucks popular in rural America, areas that overwhelmingly voted for Trump. Worth noting is that Toyota Tacoma, Ford Maverick, Stellantis' Ram, as well as General Motors' Chevrolet Silverado and GMC Sierra are all produced in Mexico.

Sam Fiorani, an industry analyst at AutoForecast Solutions, suggested that General Motors may be able to absorb some costs from its high-profit pickup models, but other manufacturers selling low-cost models like the Nissan Sentra may find it difficult to continue producing profitable models.

Fiorani stated: "Someone has to bear these costs, and these costs will be borne by manufacturers or consumers." "All cars sold in the USA will become more expensive, or profits will decrease significantly."

Tariffs could also affect the production costs of autos in the USA since many parts now come from Mexico. Latin American countries account for 43% of total auto parts imports into the USA, more than any other country.

Francisco Gonzalez, head of the Mexican National Automotive Industry, stated that regional cooperation in North America lowers costs for customers.

Auto manufacturers "cannot produce all products in one country," he said, "because it would make them lose competitiveness."