Many global automakers are planning for the costly impact of the trade war, and some saying they expect to see profits drop by billions of dollars by the end of the year, mainly citing tariffs on the auto industry imposed by U.S. President Donald Trump.
Companies like Ford, General Motors, Volkswagen, Stellantis, and many others expect tariffs to lead to higher costs to manufacture vehicles, and if consumers end up with a higher price tag as a result, then there could be a ripple effect. In some cases, that has already led to job losses.
While some changes have been made to give the auto industry some wiggle room, companies are still expecting to take a financial hit.
“There’s no economist in the world that doesn’t know that input costs are going up. And the automobile business is a big ticket, small margin business,” says dealership manager Andrew MacPhee in an interview adding, “there’s no choice but to have a price increase in all manufacturers.”
Ford Motors Inc. is in the spotlight after the company announced to the surprise of shareholders that it is suspending its forward guidance for the year. In other words, the financial future for the company is uncertain and they don’t want to give shareholders any false hope.
What Ford did say is they expect to see profits drop by $2.5 billion dollars this year citing the trade war as a main factor. The company added that $1 billion of the loss could be offset by cost-cutting and suggested the losses are ‘tariff-related’, and often those cost-cutting measures include job cuts.
Other carmakers are making similar predictions about the impact tariffs will have on the bottom line, including luxury brands like Ferrari, as well as Audi and Porsche (both under the Volkswagen Group banner).
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Ferrari announced in March that U.S. orders made before April 2 would not see any price changes, but those made after could see increases of up to ten per cent, citing “import tariffs on EU cars into the USA.”
Speaking to analysts after releasing the news, Ferrari maintained its confidence in the face of the trade war, with CEO Benedetto Vigna highlighting the company’s loyal client base, “We stand out thanks to the trust of the clients that are with us.”
Although reporting a profitable quarter overall in the first three months of the year, Ferrari said in its earnings report that it expects the same import tariffs to impact the company’s profitability for the year overall.
In recent weeks, similar conservative outlooks were announced by Volkswagen Group, Stellantis, and General Motors among others, by forecasting less revenue and profits than previously thought, signalling the tariff landscape is expected to impact profits.
In the case of the report from Stellantis, the parent company of Chrysler, Dodge, and Jeep among others, the impact of tariffs was directly cited saying, “the company is suspending its 2025 financial guidance due to tariff-related uncertainties,” also adding the company, “is highly engaged with policymakers on tariff policies, while taking action to reduce impacts.”
As of now, there is a 25 per cent tariff on all imports into the United States, including for vehicles and parts that do not comply with the current Canada-United States-Mexico Agreement (CUSMA). In response, the Canadian government has imposed counter-tariffs aimed at offsetting some of the costs to Canadian businesses.
In addition, there is a separate 25 per cent tariff on imported steel and aluminum products from Canada, and many vehicle components require these materials in the manufacturing process.
Although there are no immediate plans to do so, Trump recently said tariffs ‘could go up’ at some point.
Speaking Tuesday in the White House ahead of one-on-one discussions with Trump, Canadian Prime Minister Mark Carney told reporters, “We have a tremendous auto sector between the two of us … 50 per cent of a car that comes from Canada is American. That’s not like anywhere else in the world.”
For now, The Trump administration has provided some tariff relief for automakers in the United States that is meant to curb foreign manufacturing while enabling companies to continue operations within the country’s borders.
U.S. Commerce Secretary Howard Lutnick appeared in the Oval Office in Washington on Tuesday, alongside Trump and Carney. When asked to clarify relief measures for the auto sector, Lutnick told reporters, “We’ve made an arrangement with the car companies that 15 per cent of their USMCA parts are included, and then 15 per cent of foreign parts from the manufactured suggested retail price are not tariffed to help domestic manufacturing really thrive.”
These tariffs have only been in place for a few weeks, and it is a somewhat fluid landscape as changes are frequently made to trade and tariff policy, causing extreme volatility for businesses and financial markets. This is becoming especially evident in recent weeks as big automakers report first-quarter earnings to shareholders, along with updated outlooks for the next quarter and full year.
A study by the Michigan-based Center for Automotive Research found that tariffs will increase costs for all automakers in the United States by close to a combined total of US$108 billion this year.
With the costs to manufacture products, including cars, set to increase as a result of tariffs, automotive dealerships are preparing to increase sticker prices that consumers will have to pay.
These higher prices could lead to fewer sales and this drop in revenue is expected to lead companies to cut costs to maintain profitability. Sometimes these cost-cutting measures include job losses and plant shutdowns, as was the case for Stellantis and General Motors last week.
The most recent report on the labour market from Statistics Canada pointed to a loss of 33,000 jobs and unemployment ticking higher. This included temporary layoffs and plant closures in Canada, including Stellantis in Windsor, Ont.
The next report on employment for April comes out on Friday.
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