The threat of impending auto tariffs on vehicles produced in Mexico and Canada continues to loom, potentially leading to challenging times for vehicle affordability across North America. Industry experts warn that these tariffs, alongside additional tariffs on China and the EU, could soon become a reality.
During a recent statement, President Donald Trump indicated that these tariffs would be announced within the next few days, with reciprocal measures set to take effect on April 2. The U.S. imported $471 billion worth of automotive products in 2024, including $214 billion in passenger cars.
**Impact on Mexico**
Mexico plays a significant role in the U.S. EV market, manufacturing many electric vehicles bound for the United States. However, EVs make up a minuscule portion of the nearly 1.1 million new cars sold annually in Mexico. The primary barriers to EV adoption in Mexico are the lack of a robust charging infrastructure and high affordability issues. Despite these challenges, Mexico has recently announced plans to develop its own EV supply chain and introduce a federally subsidised EV priced as low as $4,400 CAD.
**U.S. Policy and Tariffs**
Under the Biden-era Inflation Reduction Act (IRA), tax credits of up to $7,500 USD are available for EVs assembled and sourced in North America. These credits align with the requirements of the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA. However, President Trump has expressed his intention to eliminate the EV tax credit, a move that could severely impact U.S. manufacturing.
**Canadian Context and Incentives**
In Canada, the situation is equally precarious. Automakers have already warned that tariffs imposed on Mexico and Canada could result in immediate price increases for consumers. According to a Reuters report from December, citing Wells Fargo estimates, a 25% tariff on parts from Canada and Mexico could make vehicles significantly more expensive. For U.S.-assembled vehicles, this could add approximately $2,100 USD to the price tag. For models made in Canada or Mexico, the additional cost could range from $8,000 USD to $10,000 USD.
This price hike could affect the viability of domestic automakers. For instance, General Motors (GM) relies heavily on imports from Canada and Mexico for both profitable full-size trucks and various EVs. In Mexico alone, GM assembled over 889,000 vehicles, with about 653,000 shipped to the U.S.
**Canadian EV and Hybrid Models**
The following is a list of EVs, hybrids, and plug-in models currently manufactured in Mexico and Canada, as per the American Automobile Labeling Act (AALA) labeling requirements:
- **Ford Mustang Mach-E (EV)**
- **Cadillac Optiq (EV)**
- **Chevrolet Blazer EV**
- **Chevrolet Equinox EV**
- **Honda Prologue (EV)**
- **Jeep Wagoneer S (EV)**
- **Ford Maverick XLT (EV)**
- **Audi Q5 S line 55 e (plug-in hybrid)**
- **Ford Maverick hybrid**
- **Toyota Tacoma hybrid**
- **Dodge Charger Daytona EV**
- **Honda Civic Hybrid**
- **Chrysler Pacifica Hybrid (plug-in hybrid)**
- **Lexus RX350h**
- **Lexus RX500h**
- **Toyota RAV4 Prime (plug-in hybrid)**
**Provincial Incentives**
It's also important to note that many Canadian provinces offer incentives to help offset the cost of purchasing an EV. For example:
- **Ontario** offers up to $4,000 CAD through its iZEV (incentive for zero-emission vehicles) program.
- **British Columbia** provides a rebate of up to $3,500 CAD for new EV purchases.
- **Quebec** offers one of the most generous rebates in Canada, with up to $4,000 CAD for new EVs and $1,000 CAD for used EVs.
These provincial rebates, combined with federal incentives, can significantly reduce the net cost of purchasing an EV in Canada, even in the face of potential tariff-induced price increases.
**Looking Ahead**
As the tariff landscape evolves, stakeholders in the Canadian and Mexican auto industries are closely monitoring developments. The potential financial burden on consumers and the broader economic impact remain significant concerns. Stay informed and consider available incentives to make the most cost-effective decisions in the evolving EV market.