A truck carries new cars in the port of Veracruz, Mexico.
Susana Gonzalez | Bloomberg | Getty Images
Honda boss Henio Arcangeli fears that President Donald Trump's recent proposal to impose a 5 percent tariff on car imports from Mexico will deter some Americans from cars when car prices are close to record highs.
] "Tariffs will be a problem for us and everyone else in the industry," Arcangeli said in an interview. Like many US and foreign automakers, Honda imports most of its US-bound cars from its production facilities in Mexico. The company imported 1
The North American Free Trade Agreement opened borders in the early 1990s between the US, Mexico and Canada, paving the way for an international automotive industry between the three nations. Today, Mexico is one of the largest car producing countries in the world, and cars and car parts are the single largest exports to the US by value.
Approximately 2.6 million vehicles shipped north of the border in 2018 According to INEGI data over $ 93 billion after just 1.33 million vehicles in 2011. That's about 15% of the total of 17.30 million vehicles sold in the states last year.
Trump uses tariffs to pressure the Mexican government to stem illegal immigration beyond the southern border. He threatens to impose tariffs of 5% on 10 June and "will gradually increase until the problem of illegal immigration is resolved, at which point the tariffs will be abolished," Trump said in a tweet. Subject to a decision, tariffs will rise to 25% by 1 October, which could mean more than $ 10,000 per vehicle for some cars and light trucks manufactured in Mexico, he said.
Approaching a Ford Motor Co. vehicle A checkpoint before being loaded onto a ship for export on Thursday, August 29, 2013, at the port of Veracruz, Veracruz, Mexico.
Susana Gonzales | Bloomberg | Getty Images
"Here's what you have to think about, inch equals tax hike," said Paul Ingrassia, a Pulitzer-winning auto journalist now working with the Revs Institute on CNBC Friday The US – including those with foreign brand names such as Toyota, Honda, Mercedes-Benz and Hyundai – would be affected by the tariffs if no solution were found before they take effect in less than two weeks. American assembly plants use on a large scale a considerable number of Mexican parts and components, such as wire harnesses, which are of little value or have a high workload. About 70% of the harnesses used in the US are from Mexico.
According to the US Census Bureau, these auto parts and components total $ 99.6 billion.
Even at 5% According to Joe Phillippi, head of AutoTrends Consulting, the additional tariff "could potentially affect business, especially for marginal buyers," and the cost of a typical Mexican-made Ram 1500 or Chevrolet Silverado -Pickup increase by about $ 1,500. That would be fivefold if the tariffs were not abolished by October. With some pickups and other Mexican imports in excess of $ 50,000 a piece, tariffs could add $ 10,000 or more – or force manufacturers to lose a large part of their profit margins.
The average transaction price – what customers actually pay after they incentivize options and incentives – LMC Automotive forecasts a record $ 33,457 for May, an increase of 4% over the previous year.
"The auto industry is shaken" when fares are waived, and the situation gets worse every month as they increase, "said Phillippi.
It's possible that the auto industry is trying to be a part of This was the case for some of the Trump tariffs on aluminum and steel imports, but this would be detrimental to an industry facing a slowdown in the market, according to a forecast from LMC Automotive The first four months of this year are down by 2.8% and are expected to decline by a further 2.1% when the May figures are released next week.
It has become particularly complicated on the component side since NAFTA entered into force in the year In 1994, it has become commonplace for parts to move across a largely invisible border, with some even being able to travel seven times from Mexico to the US and beyond Driving back, said Steve Kinkade, a Honda spokesman.
The Japanese automaker imported 107,989 vehicles from Mexico in 2018, an increase of 611% since 2011. Its figures are fading Compared to General Motors, which led the industry last year with 666,765 vehicles from Mexico and an increase of 109 since 2011 , 6% recorded. After that, according to INEGI, Fiat Chrysler Automobiles rose 206.2% to 504,793 vehicles over the same period.
A growing list of automakers is now producing vehicles in Mexico, using both cheap labor and the country's extensive free trade agreements. Fully one-third of the vehicles that Nissan sold in the US last year came from Mexico, while the new Audi plant near Puebla is the only global source for its latest-generation Q5 sports utility vehicle.
Arcangeli stepped out of the way of the President's direct criticism rule, saying only that Honda is "very hopeful" that a solution is found quickly and a return to "business as usual" is possible. Most of the other CNBC automakers refused to comment directly, citing a statement by the Alliance of Automobile Manufacturers
. "Our position on the tariffs remains unchanged: they are a tax to our customers, that is, they are. This is detrimental to our nation's economy and the millions of jobs in the US that depend on cross-border trade," states a statement. the interim president and CEO Dave Schwietert is credited.
At a convention that has been polarized since the 2016 elections, even some Republicans have targeted the tariff plan on Friday. US Senate Finance Committee Chairman Chuck Grassley from Iowa said: "Trade policy and border security are separate issues, which is an abuse of the President's Customs Service and contrary to the intent of the Congress." For up to six months the possibility, according to a study by the Ministry of Commerce, which has been identified as posing a threat to national security, to impose tariffs of up to 25% on cars and car parts produced in Europe. China-made cars and car parts are currently subject to customs duties due to the US-Chinese commercial dispute.
CNBC's Emma Newburger Michelle Fox Phil LeBeau  and Meghan Reeder contributed to this article.