Investing.com — The possible elimination of the USMCA free trade agreement could significantly affect the North American auto industry, as the “Detroit 3” automakers: General Motors Company (NYSE , Ford (NYSE and Stellantis NV (NYSE ) :)—face the biggest challenges, according to Bernstein.
In a report released Saturday, Bernstein highlights the critical role that Mexico and Canada play in the automotive supply chain. More than 30% of vehicles sold in the United States come from these two countries, with Mexico being the largest contributor.
Additionally, approximately 20% of the value of vehicles assembled in the United States depends on imported parts. Removing free trade status would not only disrupt supply chains, but also result in high tariff costs, particularly for automakers that rely on Mexican production.
Bernstein's analysis reveals that Detroit automakers are especially vulnerable due to their high dependence on Mexican manufacturing.
“Given the high exposure to production in Mexico and the low exposure to other international markets that will not be affected by a change in US tariffs, the Detroit 3 would be among the most affected OEMs,” analysts Daniel Roeska said in the note. and Harry Martin.
GM, for example, would see a margin hit of 2.6 percentage points to its revenue, making it the hardest-hit automaker in this scenario.
Ford and Stellantis would face significant margin pressures, while automakers with diversified production bases, such as European and Asian brands, are less exposed.
Last month, President-elect Donald Trump vowed to impose major tariffs on Canada, Mexico and China, signaling a shift toward aggressive trade policies that could spark tensions with the United States' largest trading partners.
Trump announced plans to impose a 25% tariff on imports from Canada and Mexico, linking the measure to efforts to curb drug trafficking and illegal migration. This move could potentially violate the USMCA trade agreement, which facilitates duty-free trade between the three nations.
Additionally, Trump proposed a 10% tariff on imports from China, in addition to existing tariffs. While details are still unclear, the proposal follows earlier promises to revoke China's most favored nation status and impose tariffs of more than 60% on Chinese goods.
The United States is the main market for both Mexico and Canada, absorbing more than 83% of Mexican exports and 75% of Canadian exports in 2023. The tariffs could also disrupt Asian automakers and electronics companies that depend on of Mexico as a manufacturing center for the US market. .
Trump, who originally signed the USMCA into law in 2020 after controversial negotiations, will have the opportunity to renegotiate the agreement in 2026, when a “sunset” clause allows for modifications or a possible withdrawal.
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