Auto industry braces for U.S. tariffs
Changing U.S. policies
The current U.S. administration announced tariffs on goods imported from Canada and Mexico that originally were effective for Canada and Mexico on February 4, 2025, but will now be delayed for 30 days. These tariffs would directly impact the automotive industry, given Canada and Mexico’s importance as key trade partners. The 25% tariff on all imports into the U.S. from Canada and Mexico includes cars, trucks, and automotive parts. Many participants in the auto industry are already shifting to more regional production in hopes of mitigating disruption.
Because the North America automotive industry essentially acts as an integrated system, higher tariffs might not only influence profitability, but also transportation networks and freight demand between the countries. For more information on tariffs and how to prepare, check out our free webinar, “Navigating the New Tariff Landscape.”
Beyond tariffs, the current administration has also indicated its long-term plan includes proposed tax-credit rollbacks for both automakers and auto buyers. Eliminating existing incentives may disproportionately affect traditional automakers working to convert manufacturing to electric vehicle (EV) technology and lessen consumer demand. The loss of these incentives could add to the challenges traditional U.S. automakers have competing in global markets where EVs have a growing share.
The automotive industry is a key contributor to freight demand in North America. As policy changes materialize, they could influence parts and vehicle production, sourcing networks, and cross-border trends.
Excess inventory
Many original equipment manufacturers (OEMs) are experiencing excess inventory on hand, an issue that has been growing since the COVID-19 pandemic. Excess inventory can lead to increased storage costs, reduced cash flow, and scaling back output as manufacturers try to clear it.
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