Auto industry faces potential severe financial repercussions, according to Ford's leader James Farley, if Trump's tariffs remain in place.

In a concerning development for the US automotive industry, James Farley, the president, CEO, and director of Ford, has issued a warning about the potential devastating impact of prolonged US tariffs on imports from Canada and Mexico.

Farley has been in positive conversations with the Trump administration and congressional leaders, indicating a commitment to strengthening the US automotive industry. However, he has expressed his concern about the potential chaos and costs that the 25% tariffs across the Mexico and Canadian borders could bring.

The US government has implemented and maintains a 25% tariff on certain vehicle imports from all countries, including Canada and Mexico, since April 3, 2025. This tariff policy significantly burdens the US automotive industry, with companies like General Motors expecting a $5-6 billion hit in 2025. The tariffs have led to higher costs and reduced demand, causing a decline in new car sales and threatening jobs in the US auto sector.

Ford, which derives 90% of its steel from the US, is less exposed to the tariffs on aluminum and steel confirmed by Trump this week. However, the value of Ford vehicle automotive products moved across the borders between the US and Canada and Mexico is estimated to be worth $35 billion.

Farley has criticized the inconsistency in tariff application, pointing out that Hyundai-Kia and Toyota import large volumes of vehicles into the US with no incremental tariffs, while Ford faces potential tariffs. He has also expressed concern about the US tariffs giving an advantage to foreign competitors not subject to the same tariffs, such as South Korean, Japanese, and European companies.

Ford has already sunk capital into battery production and EV assembly across Ohio, Michigan, Kentucky, and Tennessee. If big parts of the IRA bill are repealed, many jobs will be at risk. Farley has stated that if the tariffs were to persist, Ford "would have to make some major strategy shifts in the US" and look at building new plants there.

Sherry House, Ford's new chief financial officer, has stated that the precise impact of the new tariffs would depend on various factors such as "price elasticities", how its tier one and two suppliers react, as well as substitution effects and possible duty drawbacks.

The industry is already witnessing changes in trade policy, with tax policy expected to follow, including that related to the Inflation Reduction Act (IRA) and emissions policy that have big consequences for the automotive sector. Ford is promising stronger products and services for 2025, suggesting control over its own destiny despite operating in uncertain times.

However, the threat of 25% tariffs on goods coming from Canada and Mexico from next month is just one of the policy changes that Ford is facing. The removal of tax credits for electric vehicle buyers, the suspension of federal funding for EV charging stations, and the end of low-interest loans for carmakers aiming to build EV assembly and battery plants are other challenges the industry is grappling with.

China is currently subject to 100% tariffs on EV imports, despite Chinese carmakers not making significant volume shipments to the US. Meanwhile, Chinese OEMs are expanding and becoming a major force in the automotive sector, with strong operational fitness and global supply chains. This further complicates the situation for US automakers like Ford.

Farley has reiterated the devastating impact of prolonged US tariffs on imports from Canada and Mexico, specifically on the US automotive industry. He has warned that if these tariffs persist, it could "blow a hole in the US industry that we have never seen" and give free rein to South Korean, Japanese, and European companies not subject to the same tariff who are bringing 1.5m to 2m vehicles into the US.

Auto industry faces potential severe financial repercussions, according to Ford's leader James Farley, if Trump's tariffs remain in place.