US President Donald Trump has made headlines with his statement that he could impose 25 per cent tariffs on goods coming from Canada and Mexico starting from February 1, 2025. This move is likely to have far-reaching implications across various sectors, with several global companies facing potential challenges due to the proposed tariffs. On Tuesday, shares of several Asian automakers and battery firms dropped, reflecting the widespread concern over the impact of these tariffs. Below, we look at the industries and companies that may be affected by these trade developments.
Automakers
The automotive sector is among the most vulnerable to Trump’s proposed tariffs, particularly for companies with manufacturing plants in Mexico.
- Audi: Volkswagen’s Audi plant in San Jose Chiapa, Mexico, produces the Q5 model and employs over 5,000 workers. In 2023, the plant produced nearly 176,000 cars, with about 40,000 units being exported to the US in the first half of 2024.
- BMW: BMW’s San Luis Potosi plant in Mexico manufactures popular models like the 3 Series and 2 Series Coupe. The plant serves the US and global markets, with an eye towards future production of electric vehicles starting in 2027.
- Honda motor: Honda produces about 80 per cent of its vehicles in Mexico for the US market. Honda’s Chief Operating Officer, Shinji Aoyama, has already signalled that the company may reconsider its production strategy if tariffs are implemented permanently.
- Mazda: Mazda’s plant in Mexico produced approximately 209,000 vehicles in 2024, with a significant proportion being exported to the US market.
- Nissan motor: Nissan operates two plants in Mexico, producing popular models like the Sentra and Versa for the US. Nissan produced nearly 505,000 vehicles in Mexico in the first nine months of 2024, with a large portion destined for the US.
The imposition of tariffs would hit these manufacturers hard, disrupting their supply chains and possibly leading to higher prices for consumers in the US.
Auto suppliers
Several key auto suppliers have also established manufacturing operations in Mexico to support US production, and they stand to be affected by the proposed tariffs.
- Autoliv: The Swedish company, a leading maker of airbags and seat belts, employs around 15,000 people in Mexico.
- Michelin: Michelin has two plants in Mexico and could see significant disruptions to its operations if tariffs are enforced.
- Yanfeng: Yanfeng Automotive Interiors, a Chinese seat maker, supplies parts to major automakers like General Motors and Toyota and operates extensively in Mexico.
These auto suppliers face the dual challenge of higher costs for both production and logistics if tariffs are introduced, potentially raising costs for car manufacturers and consumers alike.
Electronics
The electronics sector, particularly companies with significant operations in Mexico, is also vulnerable to tariff increases.
- Foxconn: The Taiwanese tech giant is building a massive AI server factory in Mexico in collaboration with Nvidia, aiming to start production in 2025. Foxconn could see delays or cost increases in its project, depending on the status of the tariffs.
- Lenovo: Chinese computer maker Lenovo manufactures servers and data centre products in Monterrey, Mexico, catering primarily to the North American market.
- Samsung electronics and LG electronics: Both South Korean companies have major manufacturing plants in Mexico, producing items like home appliances and TVs for the US market. Tariffs would negatively affect their profit margins and may lead to price hikes in consumer products.
Food and drink
The food and beverage sector is also expected to face challenges, especially companies with significant operations in Mexico.
- Campari: Italian spirits giant Campari produces tequila at its Mexican facilities and sources about 27 per cent of its US sales from Mexico and Canada.
- Procter &gamble and unilever: Both global consumer goods companies have extensive supply chains in Mexico, with P&G’s shipments from Mexico accounting for about 10 per cent of its imports to the US. Unilever faces similar exposure, with 2 per cent of its US sea imports coming from Mexico.
These companies, like others in the manufacturing sectors, are concerned about increased production costs and the potential impact on their pricing structures.
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Implications for global trade
The proposed tariffs could lead to significant changes in trade dynamics between the US, Mexico, and Canada. For businesses with operations in Mexico, the tariffs could force companies to reconsider their supply chains or even shift production elsewhere to avoid additional costs. Some may even consider moving their operations to countries not impacted by the tariffs, further complicating trade relations and economic strategies.
Conclusion
Trump’s proposed 25 per cent tariffs on Canada and Mexico are set to ripple across global markets, affecting automakers, auto suppliers, electronics companies, and food and beverage firms. The imposition of tariffs could lead to disruptions in the supply chain, rising production costs, and potentially higher prices for consumers. Companies in various sectors are already bracing for the potential impact, with many likely to reassess their strategies and operations in response to the evolving trade environment. As the tariff deadline of February 1, 2025 approaches, businesses and policymakers alike will be watching closely to see what steps the US government will take next.
