Threat of tariffs looms as Detroit Auto Show 2025 underway

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This year's Detroit Auto Show, ongoing from Jan 10-20, takes place with potential added headwinds for automakers due to President-elect Donald Trump's threat of tariffs on America's top trading partners.

As one of the preeminent annual automotive events in the world, the Detroit Auto Show has opened in the U.S. state of Michigan, showcasing the latest innovations and trends in the auto industry.

U.S.-based automakers and industry professionals have gathered at the event and have taken the opportunity to discuss challenges facing the industry. Topping the list, U.S. President-elect Donald Trump has threatened a 25 percent tariff on imports from Canada and Mexico as well as further tariffs on Chinese goods.

If implemented, the tariffs could have a major impact on shipments of Canadian- and Mexican-made auto parts to U.S. automakers.

"It would have a very strong and negative effect on the auto industry. A very large share of the automobiles right now that are produced anywhere in North America, cross the border, in terms of parts and everything one or even two or three times. So, we would see substantial price increases that would affect consumers and a huge disruption of the ability to produce vehicles as we have now," said Patrick Anderson, founder of Anderson Economic Group.

Canada and Mexico account for 50 percent of all auto parts exported to the United States worth nearly 100 billion U.S. dollars.

At the auto show, U.S. automaker Ford unveiled a host of new vehicles. Ford President and CEO Jim Farley said that the company has already held talks with Trump.

"A lot of our supply chain depends on countries from around the world, and so tariffs are really challenging for any company. I'm confident that with Ford being who it is, we'll work with the administration through these very difficult times. And I'm very optimistic, based on our conversations so far that we'll be able to make a lot of progress," said Farley.

The auto industry is already facing multiple headwinds, including high interest rates -- costs that get passed on to consumers, driving up prices for both new and used vehicles and extra competition from new EV-focused auto companies.

American vehicles are full of foreign-made parts, so new tariffs are likely to drive prices even higher.

"You can't think about a world in which prices change by 25 percent almost overnight, and you don't have some people that just can't buy your product, or that you can't build it. And for that reason, almost everyone in the industry is hoping that the U.S. and Canada and Mexico negotiate something that's not so harsh," said Patrick Anderson, founder of Anderson Economic Group.
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