A Potential $2,100 Price Hike for US-Assembled Cars

President-elect Donald Trump's proposed tariffs on Mexico and Canada could drive up the price of cars assembled in the US by an average of $2,100, according to estimates by Wells Fargo analysts. This would significantly impact the US's top three automakers – General Motors, Stellantis, and Ford Motor Company – due to their reliance on foreign parts sourcing and Mexican imports.

The tariffs would also have ramifications beyond the US-Mexico-Canada trade triangle. Mexico has threatened to retaliate with its own tariffs, potentially putting joint ventures at risk. Additionally, the price of pickup trucks from the top three US car manufacturers – 88% of which are imported from Mexico – could rise by an average of $3,000, according to Mexico's economic minister.

The Wells Fargo analysts estimate that prices in the US for vehicles entirely produced in Canada and Mexico could increase by $8,000 to $10,000, potentially resulting in a significant hit to the earnings of Detroit's big three automakers. They estimate a potential EBIT risk of $5 billion to $9 billion for the D3 before pricing or plant closures.

While Trump's strategy aims to "bring jobs back home," experts like Colin Lewis, emeritus professor of Latin American economic history at the London School of Economics, believe it may be more difficult than anticipated due to massive US investments in Mexico. Additionally, Mexico's economic minister argues that the tariffs would effectively double the taxes paid by US firms producing in Mexico, leading to the loss of 400,000 jobs in the US.

Overall, the proposed tariffs could have a significant impact on the US auto industry, potentially leading to higher prices for consumers, job losses, and a hit to the earnings of major automakers.