American car buyers would be hit hard by President-elect Donald Trump's plan to impose a 25% tariff on all goods coming from Mexico and Canada.
The top 10 car manufacturers built 1.4 million light vehicles in Mexico during the first six months of this year, with 90% sent to the U.S., Reuters reported Tuesday evening, citing data from the Mexican Automotive Manufacturers Association.
In addition to fully manufactured vehicles, Mexico and Canada supply more than 50% of all of America's imported auto parts, worth nearly $100 billion, which would increase the cost of building autos in the U.S.
Trump and his allies have repeatedly claimed that the countries which produce imported goods pay American tariffs but experts overwhelmingly reject that assertion, saying those costs are borne by U.S. companies and passed on to their customers.
"That's how tariffs work. Even though the (incoming Trump) administration might want to spin it that Mexico is paying...ultimately the consumer will bear this," Sudeep Suman, a managing partner with the AlixPartners consulting company told Reuters.
Although the impact won't be clear until the tariffs are imposed, said Ivan Drury, director of insights for Edmunds, which tracks car prices.
"It will have a ripple effect throughout the market, and fallout on all vehicles," Drury told CNN. "You're going to disrupt the used car market as well."
Drury also said there was a large well of "potential car buyers who have held out because of high prices."
"If these tariffs are put in place, it could tank the industry. I hope for the car buying public, nothing is as aggressive as advertised," he said.
During his first term in office, Trump struck a trade deal with Mexico and Canada known as the United States-Mexico-Canada Agreement, or USMCA.
Kenneth Smith Ramos, who was Mexico's chief negotiator for the pact, said the tariff plan Trump announced Monday night on social media would hurt the U.S. as much its trading partners.
"The U.S. would be shooting itself in the foot," Ramos told Reuters.
Trump said his plan was intended to pressure Mexico, Canada and China — where all goods exported to the U.S. would face a new 10% tariff — into cracking down on the flow of illegal drugs and migrants into the U.S.
That's led some observers to speculate it's really just a bargaining tactic.
"It leaves the door open to Canada and Mexico coming up with a credible plan over the next two months to try and avoid those tariffs," Thomas Ryan, North America economist at Capital Economics, told Reuters.
