Carmakers Idle Plants, Rethink Prices as Trump’s Tariffs Hit

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Just hours after taking effect, President Donald Trump’s 25% tariffs on imported cars are already reverberating around the globe.

Jeep-maker Stellantis NV plans to temporarily halt some production in Canada and Mexico. Ford Motor Co. began offering steep discounts to keep customers coming to showrooms. Volkswagen AG warned dealers that it will tack on import fees to the vehicles it ships to the US, while Toyota Motor Corp. is cutting overtime at a factory in Mexico.

The moves show the immediate fallout from car tariffs that took effect shortly after midnight in Washington. The levies, part of a broader trade war, are expected to upend supply chains and add thousands of dollars in costs to most vehicle models.

Canada responded with plans to slap a 25% retaliatory duty on US-made vehicles, Prime Minister Mark Carney announced on Thursday.

Automaker shares fell along with the rest of the market after trading began Thursday. General Motors Co. was down 3.3% at 11:03 a.m. in New York, Ford tumbled 4.4% and Stellantis declined 7.4%. Electric-vehicle maker Tesla Inc., which analysts expect to be relatively less impacted by tariffs, dropped 6.9%.

The implementation came shortly after Trump said the US would impose a 10% tariff on every country that exports to the US, plus additional duties targeting about 60 nations. Although imported cars and parts are exempt from those so-called reciprocal tariffs, carmakers are already reeling from Trump’s escalating trade war.

“While the sector may feel it just dodged a bullet, we remain concerned that vehicle and parts tariffs are here to stay and will add a substantial cost burden,” Bernstein analyst Daniel Roeska said in a note to clients. Certain auto parts will also be hit by a levy no later than May 3 under a plan Trump announced last week.

The US will also keep existing 25% tariffs on Canada and Mexico, and an exemption for goods that comply with the free trade agreement between the countries will remain indefinitely, officials said. Those levies were initially imposed to urge action to curb the flow of fentanyl. The countries would switch to the new tariff regime if those initial levies are lifted, officials said.

Car buyers have been rushing to US showrooms to lock in deals before potential price hikes from the levies. That drove March sales to an annual rate of about 17.8 million vehicles, the most since April 2021, according to JP Morgan analyst Ryan Brinkman. 

But as that supply runs out, automakers are bracing for significant potential cost increases and supply-chain turmoil. 

Auto executives continue to lobby the administration to limit the fallout, with Ford, GM and Stellantis focusing their efforts on excluding certain low-cost car components from the tariffs.

On Thursday, timed with the new tariffs, Ford said it was rolling out discounts on nearly its entire lineup as a way to keep car buyers coming into its showrooms.

Ford’s “From America, For America” discount program, which runs through June 2 and offers an employee-pricing-for-everyone deal, is reminiscent of the “Keep America Rolling” 0% financing promotion GM offered after the terrorist attacks of September 11, 2001, which jump-started US auto sales in a bleak economy.

Industry executives have said that they support Trump’s goal of building more vehicles in the US and expanding the country’s manufacturing base. But moving auto assembly plants will likely take years, and may never happen for cash-strapped parts suppliers.

Stellantis, which owns brands including Ram and Chrysler, said it will pause production at its Windsor, Ontario, plant for two weeks beginning Monday, citing uncertainty around tariffs. The company will also idle its Jeep plant in Toluca, Mexico, that makes the entry-level Compass. The moves will also affect employees at several US powertrain and stamping facilities.

About 900 workers across all affected sites will be temporarily laid off, including workers at several US powertrain and stamping facilities, a Stellantis spokeswoman said.

“With the new automotive sector tariffs now in effect, it will take our collective resilience and discipline to push through this challenging time,” Antonio Filosa, chief operating officer for the Americas, said in a memo to employees. “We are continuing to assess the medium- and long-term effects of these tariffs on our operations, but also have decided to take some immediate actions.”

Toyota has halted overtime work at its plant in Guanajuato, Mexico, for the time being in response to the tariffs, said Alejandro Rangel, head of the SITIMM union that represents workers at auto suppliers in central Mexico. The plant makes the Tacoma hybrid pickup and exports most of its production to the US. 

Honda Motor Co. meanwhile is holding talks with workers to reduce or cancel overtime for the next six weeks at its assembly plant in the same state that makes the HR-V small crossover, largely for export, Rangel said.

A representative for Toyota’s North American operations had no immediate comment. Honda’s North America unit did not reply immediately to a request for comment.

Rangel said further reductions at those plants are not expected for now, because demand for those vehicles exceeds the factories’ installed capacity.

“This is very important news here in the region, because around each of these two automotive plants, we have between 30 and 40 companies that are direct suppliers to these plants,” Rangel said.

Mercedes-Benz Group AG production chief Jörg Burzer said Thursday the carmaker is considering making more vehicles in the US in response to the tariffs. The company is also weighing whether to pull its least expensive cars such as the GLA small SUV from the US market, because the tariffs would make those vehicles economically unfeasible, Bloomberg has reported.

“We’re still assessing the impacts of these tariffs,” Burzer said on the sidelines of a company event in Stuttgart, Germany. “We have made some plans, but flexibility is absolutely key.”

Volvo Car AB Chief Executive Officer Håkan Samuelsson also pledged to increase the number of cars it builds in the US and move another model to its South Carolina factory. The Swedish carmaker “will have to look closely” at which model it will add to production lines, he said in an interview Thursday. 

Meanwhile, Volkswagen AG sent a memo to its US dealers warning them that it plans to add import fees to the sticker prices of its vehicles shipped into the US. 

With assistance from Chester Dawson, Alex Vasquez, Josh Wingrove, Meghashyam Mali, Rafaela Lindeberg, William Wilkes, Derek Wallbank and Keith Naughton.

This article was generated from an automated news agency feed without modifications to text.