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Graphic Truth: Where US automakers get their parts
As part of the broad suite of tariffs that he imposed on April 2, US President Donald Trump introduced a 25% levy on all auto parts entering the United States.
No matter the part, US automakers import huge amounts of each vehicle from abroad. The United States, for example, purchased $3.3 billion worth of brakes from Mexico and $2.8 billion of silencers and exhausts from Japan last year.
This chart excludes some of the mechanics of a car, such as engines, many of which are also imported from abroad. In fact, not a single car currently available in the US domestic market is 100% American-made, according to the National Highway Traffic Safety Administration. So, unless US parts manufacturers can plug the gaps, car companies are on the road to higher production costs.Volkswagen export cars are seen at the port of Emden, Germany, beside a VW plant.
Trump hits global auto sector hard with new tariffs
On Wednesday, ahead of what Donald Trump is calling “Liberation Day,” when the administration plans to unveil a series of “reciprocal” tariffs, the president signed an executive order levying 25% tariffs on automobiles and auto parts made outside the United States. The tariffs will come into effect on April 2.
The new tariffs will be applied on top of existing duties on materials such as steel. For Canada and Mexico, which are party to a free trade deal with the US and whose auto manufacturing industries are intimately connected to their American partners, the tariff will only be applied to the non-US content of a vehicle or its parts. Economist Jim Stanfordpoints out, however, that this means every consumer car and truck in the US will be tariffed since no vehicle is uniquely and entirely made in America.
Trump says his goal is to permanently shift auto manufacturing to the US. But countries affected by the tariffs are pushing back. After the announcement, Canada, the European Union, Japan, China, the United Kingdom, and Germany decried the move. Japan says it’s “putting all options on the table” in response, and the German economy minister is promising “a firm response” from the EU.
In Canada, Prime Minister Mark Carney, who is on the campaign trail, called the tariffs a “direct attack” and said the country will defend its workers and industry, which accounts for over 600,000 direct and indirect domestic jobs. Carney canceled a Thursday campaign event to return to Ottawa to convene a meeting of his Cabinet Committee on Canada-US Relations. Earlier in the day, he promised that a reelected Liberal government would create a CA$2 billion fund to protect workers in the industry and to boost domestic manufacturing capacity, creating a “made-in-Canada” supply chain as the future of the continental auto industry remains in doubt.Ontario Premier Doug Ford speaks during a press conference in Toronto, Canada, on May 30, 2024.
Three amigos, or two?
Ford called on Mexico to match Canadian and American tariffs on Chinese imports to stop it being a “backdoor for Chinese cars, auto parts, and other products."
Ford’s province depends on the CA$11.6 billion auto industry, with integrated supply chains across the border. Any threat to that could cause an economic meltdown.
During the negotiations of the new NAFTA — the United States-Mexico-Canada Agreement — in 2019, some Conservative critics of Justin Trudeau’s government faulted the Canadians for making common cause with Mexico in resisting US demands. They are getting an early start this time ahead of the deal’s review in 2026.
“If Mexico won’t fight transshipment by, at the very least, matching Canadian and American tariffs on Chinese imports, they shouldn’t have a seat at the table or enjoy access to the largest economy in the world,” Ford said.
Deputy Prime Minister Chrystia Freeland, who played the pivotal role in negotiating USMCA withUS Trade Representative Robert Lighthizer, has repeatedly emphasized that Canada and the United States are in lockstep on tariffs on China.
Graeme Thompson, a senior analyst with Eurasia Group's global macro-geopolitics practice, says it is hard to know if they will remain in lockstep if Donald Trump’s tariffs on China get too high.
“Given Canada’s dependence on the US market, I think Ottawa will be tempted to do things that only a few years ago would have seemed impossible – including imposing significant new tariffs on China and abandoning Mexico if necessary to preserve its trade and security relationships with Washington.”
Lighthizer, who is expected to return to his job under Trump 2.0, is laying the groundwork for a new tariff policy that would include a 20% tariff on all goods coming into the US.
If there is no exemption for Canada, the policy would also lead to a sudden and dramatic slowdown in the Canadian economy.
Expect the Canadians to remind the Americans that Canada exported $124 billion of oil to the United States last year. Any new tariffs on that trade would increase prices at the pump for Americans, which Trump’s party would pay for in the 2026 midterms.
Car thieves hit the gas. Drivers foot the bill.
Auto thefts, including carjackings, are up in the United States and Canada. Politicians are noticing – and so are insurance companies. Last week, Ottawa went as far as to convene a national summit dedicated to the problem, and the criminal trend has grabbed headlines in both countries, tracking the many locations where vehicles end up, from Malta to Mexico to Ghana.
The jump in stolen vehicles on both sides of the border has some concerned about a return to the bad old days. In 1991, there were 659 car thefts for every 100,000 people in the US. In 2022, there were 283 – much lower than in the 90s but the most since 2008 and an increase of 10% from 2021. More than a million vehicles were pinched, and Kias and Hyundais have been particularly hard hit, with a leap of 1,000% since 2020.
Canadian data paints a similar picture, with a decline in thefts throughout the early 2000s followed by a recent increase. In 2022, over 105,000 vehicles were stolen. While data is still coming in, 2023 looks to be just as bad or worse.
As cars go missing, and bandits make off like, well, bandits, drivers are set to pay for it. Politicians might end up paying, too, if dissatisfied voters turn their frustrations on the leaders. And while there are plenty of solutions to the problem, it won’t be solved overnight or by stump speeches calling for ‘law and order’.
Who’s responsible? Organized crime is largely to blame for the rise in thefts. Vehicles are stolen and transported overseas to the Middle East, Africa, Asia, and Eastern Europe through major ports such as Vancouver, Montreal, Halifax, and Newark. Some are driven across the US-Mexico border. Proceeds from stolen vehicles are used to fund gang and cartel operations and contribute to, among other things, human trafficking, drug dealing, and the illicit arms trade.
Why is it happening? As always, good, old-fashioned supply and demand is a key cause, particularly after the pandemic strained supply chains and the value of vehicles and auto parts shot up.
According to one expert, lax policing and a “mission accomplished” attitude adopted by police and politicians in the wake of previously declining theft rates also play a role in the increase, especially in Canada. Poor monitoring and policing of ports are also to blame.
Stolen vehicles are a significant problem on both sides of the border, but one country stands out as an extra-convenient playground for thieves. As Michael Rothe, president and CEO of the Canadian Finance and Leasing Association told Maclean’s, in recent years, “Canada in general became very much a high-reward, low-risk environment, particularly compared to the United States.”
Certain vehicles are also getting easier to steal. Last year, a handful of American cities sued Kia and Hyundai over the issue. The companies paid hundreds of millions in California after a viral TikTok trend showed users how easy it was to steal the cars. Manufacturers cutting corners has been a dream for gangsters and a nightmare for drivers as thieves exploit vulnerabilities in vehicles that are increasingly reliant on high-tech. And police rarely find the thieves – 90% of auto theft cases go unsolved in the US.
Who’s paying the price? Insurance rates in the US and Canada are up and may go higher still in 2024. The US saw a 26% increase over last year thanks to, among other factors, inflation and thefts. Drivers of commonly stolen cars in Canada have seen premiums rise between 25 and a whopping 50% in the last two years. A recent survey found more than 80% of Canadians are concerned about auto theft.
What can be done? The issue will likely draw more than just political attention, says Graeme Thompson, senior analyst of global macro‑geopolitics at Eurasia Group.
“I think it will put real pressure on governments to deal with the issue,” he says, noting that action will likely take a tough-on-crime approach, “if for no other reason than it’s easier to promise and communicate tougher criminal justice policies than something like port reform or new regulations for auto manufacturers, which are both downstream from the problem of people’s cars being stolen from their driveways.”
The issue has already brought about a response. In Canada, Conservative opposition leader Pierre Poilievre is promising to bring in tougher penalties for car thieves. Prime Minister Justin Trudeau seems open to charting a similar course. In the US, some states are on the same wavelength, including Tennessee, where candidates are going all-in on the tough-on-crime bandwagon.
Trudeau is also set to spend just under $30 million on the issue, earmarking the cash for the country’s border service agency and both domestic and international cooperation aimed at identifying and tracking down thieves. Ontario – a hotbed for theft – is dedicating its own cash, too, for police projects.
Cities and states in the US are adopting similar law-enforcement and information-sharing programs, including efforts by New York Gov. Kathy Hochul,New Jersey Gov. Phil Murphy, and New York City Mayor Eric Adams.
Drivers, meanwhile, are being advised to take matters into their own hands to help keep their vehicles safe – advice which only goes so far. People hit hard by higher insurance rates can shop around for alternative providers or even go so far as to avoid the most commonly stolen vehicles, for which insurers sometimes charge a premium.
Of course, we can’t divorce any policy action on these files from the electoral considerations that politicians on both sides of the border are watching. President Joe Biden and the Democrats are headed for an election in November while Trudeau and his Liberals, way down in the polls, are due for one by fall 2025. Auto theft may keep their attention.
As Thompson points out, “the perception of rising crime is becoming a real drag on both the Liberals in Canada and the Democrats in the US, and opposition parties are positioning themselves as best to handle the problem.”
In that regard, the opposition sides may have an advantage in both countries. While auto theft might not dominate voters’s minds, as Thompson notes, “if combined with a broader public concern over law and order, it would likely benefit the Tories and the Republicans.” So, don’t expect an end to the issue anytime soon – either thefts themselves or the political hand-wringing.
A United Auto Workers union member holds a sign outside Stellantis Sterling Heights Assembly Plant to mark the beginning of contract negotiations in Sterling Heights, Mich., in July.
US autoworkers drive a hard bargain
Unionized workers at America’s Big 3 automakers could be on strike as of Sept. 14. The 146,000 members of the United Auto Workers and their pugnacious president, Shawn Fain, are ready to rumble. For the first time, the UAW has not yet chosen a “target” company against which to strike but has threatened to walk off the jobs at all three at once.
What do they want?
The UAW is demanding a 46% pay raise, a 32-hour week with 40 hours of pay, and a restoration of traditional pensions. In response, Ford offered a 9% wage increase and one-time lump-sum payments, for a total raise of 15% over four years. Stellantis and GM have yet to file counterproposals, leading to the UAW recently filing charges of unfair labor practices against them.
What would a strike do to the US economy?
The auto biz makes up 3% of US GDP. A tripartite 10-day strike could cost workers and employers $5.6 billion. During a 40-day UAW strike in 2019, GM alone lost $3.6 billion. The union’s strike fund is estimated to last about three months, so this could be a long haul.
Canada’s 18,000 autoworkers and their union, UNIFOR, have also voted to strike on September 18, but will only target Ford. Analysts predict this could impact the Canadian supply chain and raise vehicle prices, further fueling inflation.
What are the political implications?
The strike puts US President Joe Biden between a rock and a hard place, just in time for a presidential election year. His focus on electrifying America’s vehicle fleet has sparked workers’ fears of wage and job cuts, as EVs require fewer and lower-skilled employees to produce.
The conflict is also playing out as part of a larger class war that is shaping politics around the globe. The Big 3 collectively posted income of $164 billion over the past decade and their CEOs earn multi millions annually. Fain has bitterly complained about one standard for the corporate class and another for ordinary workers. So far, he has refused to endorse Biden, but also said that the return of Republican Donald Trump would be “a disaster”.
What’s next?
Biden recently named a White House liaison to the union and the automakers. He claims a strike can be averted, but faced with the two sides so far apart, most industry watchers believe a strike is inevitable. As one Michigan analyst put it, “President Fain has declared war, and that usually means there’s going to be a battle, and that battle would be a strike.”
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