The United States is set to impose a five percent tariff on all goods imported from Mexico on June 10th and a number of automakers are scrambling to prepare for potentially devastating impacts.
According to Reuters, some automakers are planning to delay shipments of vehicles made in Mexico. This could prove disastrous if tariffs remain in place and continue to rise, but the publication says the delays are only aimed at models which have high levels of existing inventory in the United States.
While some companies are planning to delay shipments, others are rushing to beat the clock. In particular, the publication says a handful of companies are trying to get critical parts out of Mexico before the tariffs go into effect.
Mexico is sending a big delegation to talk about the Border. Problem is, they’ve been “talking” for 25 years. We want action, not talk. They could solve the Border Crisis in one day if they so desired. Otherwise, our companies and jobs are coming back to the USA!
— Donald J. Trump (@realDonaldTrump) June 2, 2019
While the tariff is already wrecking havoc on the supply chain, the biggest blow could be yet to come. According to LMC Automotive, prices of vehicles imported from Mexico could climb by an average of $8,500. That’s a huge jump and it means Mexican-made vehicles would no longer be an option for a number of American consumers.
Of course, we live in a global market and a number of automotive components are built in Mexico. This means vehicles made in the United States would also be impacted by the tariff as many use parts sourced from south of the border.
The rate and duration of the tariff will have a big impact on how devastating it is. As we have previously reported, the tariff starts at five percent but could eventually hit 25 percent – on October 1st – if Mexico doesn’t take “effective actions” to limit the flow of migrants and drugs coming into the United States.
LMC Automotive believes the industry can absorb the impact of a five percent tariff for about a month, but anything more could be disastrous. Their analysts believe a prolonged 25 percent tariff could cut new car sales in the United States by up to 1.5 million units annually and possibly push both countries into a recession.
The tariff would have a huge impact on Mexican-made vehicles and Car & Driver reports there are 39 models built in the country and imported into the United States. GM would be particularly hard hit as the company imports popular vehicles such as the Chevrolet Blazer, Equinox, Silverado and Trax as well as the GMC Terrain and Sierra.
Nissan would also be hard hit as imports include the Frontier, Kicks, Sentra, Versa and NV200. Other models facing the tariff include the Audi Q5, BMW 3-Series, Honda HR-V, Infiniti QX50 and Jeep Compass. That’s not even mentioning the Toyota Tacoma and Volkswagen Tiguan, but you can check out the full list here.