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Trump Auto Tariffs: Everything You Need to Know

President Trump threatened to impose a blanked 25% tariff on all auto imports. We used data to estimate its impact in North America.

Mar 31, 2025

article

Blog

Trump Auto Tariffs: Everything You Need to Know

President Trump threatened to impose a blanked 25% tariff on all auto imports. We used data to estimate its impact in North America.

Mar 31, 2025

article

Blog

Trump Auto Tariffs: Everything You Need to Know

President Trump threatened to impose a blanked 25% tariff on all auto imports. We used data to estimate its impact in North America.

Mar 31, 2025

Last week, president Donald Trump made a shocking announcement: automotive imports to the U.S. would be subject to a 25% tariff. Although these tariffs come amidst a plethora of other trade restrictions in the second Trump term—including tariffs on steel and against some of its closest trade partners—they stand out from the rest for one particular reason: they are targeting a crucial industry to the US. An industry, might we add, that has taken a global turn in the last thirsty years.

In this article, we look more closely at the impact of President Trump’s tariff by understanding the auto industry as a whole. As our research shows, while there might be a temptation to think of industries on a national basis, when it comes to vehicles, the industry has become transnational. More specifically, instead of thinking of a Mexican or US auto industry, we should speak of a much broader North American sector due to its integration over the years.

Let’s start with some history. While today, we can certainly speak of a North American auto sector, that wasn’t always the case. Until 1994, when the North American Free Trade Agreement (NAFTA) came into effect, trade between the U.S., Mexico, and Canada wasn’t anything special—Mexico even favored protectionist measures for most of the twentieth century as a means to protect local industries. But with NAFTA—and the subsequent USMCA—trade soon boomed.

One needs only look at US imports between 1993—the year prior to NAFTA being signed—and 2022. In that time period, the US became the largest consumer of global products. In 1993, the U.S. imported just $719 bn worth of goods. By 2022, that number had grown to well over $3.9T—a 450% increase.

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The same thing happened to the auto industry—that is, it boomed. In the figure below, using data from Reuters, we were able to sketch out the evolution of auto exports between North American countries. As the figure shows, all economies saw a drastic increase in auto exports during the first 25 years of the treaty coming into effect. As a whole, internal auto trade in North America grew from $111.16 bn in 1993—the year prior to NAFTA coming into effect—to $214 bn in 2016. For the U.S. this represented an increase in auto exports of 60.47%. Canada saw a smaller, albeit still significant increase of about 10.4%. But of the three, no country saw an increase like that of the Mexican auto sector. In the years following NAFTA’s signing, Mexico went from exporting $12 bn worth of cars and auto parts to $83 bn—that is a shocking 591.67% increase.

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The above goes against the common argument that NAFTA hurt the US auto sector by developing Mexico and Canada. As the data shows, all countries in North America grew at a considerable pace after NAFTA came into effect. The sector, simply put, became regionalized instead of a national phenomenon.

Now, it is worth acknowledging that Mexico’s auto industry did grow much faster than its counterparts. In the figure below, we plotted Mexican GDP from the auto industry alone between 1993 and 2023. As the figure shows, there was a considerable boom when it came to the auto industry. Since the signing of NAFTA, the automotive industry went from contributing over 606 bn Mexican pesos to 2.3 trillion. For reference, that is an increase of 284.84% in the span of thirty years.

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Thus, it should come as no surprise that Mexico as a whole has seen a drastic growth in the number of vehicle and car part factories in the country. In a recent white paper, we found that there are 26 different car factories across the country—many of them focused in the central and northern parts of Mexico. Meanwhile, as we show in the figure below, there are even more car part factories across the country. There are, in fact, as many as 1,948 car part factories spread across Mexico. 

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The above trend is likely one fueling President Trump’s strategy. There is a tacit belief that Mexico’s growth in the auto sector came at a considerable cost from the U.S. While it is true that the US auto sector did grow in the years following NAFTA and the USMCA, it did so at a much smaller rate than Mexico. Thus suggesting missed opportunities for the U.S. market.

The problem, however, is that president Trump tariffs would come at a great cost to US consumers which, again, are the main consumers of Mexican and Canadian cars and auto parts. In total, as we show in the figure below, President Trump’s projected tariffs would result in price distortions of $44.93 bn of which $30.75 bn would come from tariffs to Mexico and $14.18 bn from tariffs to Canada. Since tariffs are often passed down to consumers in the form of higher costs, this would result in considerable price increases for U.S. consumers.

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That, in sum, is the reason why auto tariffs are much more drastic than others proposed by the Trump administration. In applying such trade restrictions, the U.S. is going against decades of post-NAFTA history during which North America grew to develop a joint auto industry to the benefit of all consumers. Once tariffs take hold, it is unclear how auto manufacturers will respond.

At Desteia, we believe companies should have the tools to address any possible disruption—including potential tariffs to their goods. If you want to see how better visibility can help your company navigate through difficult situations, make sure to schedule a call with our team of experts. 


Automating cross-border trade.

© 2025 Desteia, inc. All rights reserved.

Automating cross-border trade.

© 2025 Desteia, inc. All rights reserved.