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While tariffs would start at 5 percent, the president has said they could rise as high as 25 percent by October if the Mexican government does not address the immigration situation at the border.
One area that stands to be particularly affected is the auto industry since many companies rely on trade with Mexico for production, or for parts in order to complete the final assembly.
According to analysis from Emmanuel Rosner, who leads coverage of the auto industry for Deutsche Bank’s equity research team, the average price of vehicles sold in the U.S. could climb by about $1,300.
Additionally, if the tariffs escalate to a rate of 25 percent, it could decrease overall vehicle demand by 3 million units – or 18 percent.
Many automakers had already reported declining sales in the first quarter.
|GM||GENERAL MOTORS COMPANY||29.01||+1.03||+3.69%|
|F||FORD MOTOR COMPANY||7.29||+0.20||+2.78%|
|FCAU||FIAT CHRYSLER AUTOMOBILES N.V.||11.73||+0.50||+4.45%|
Meanwhile, on Wednesday, General Motors CEO Mary Barra told Reuters that the impact of the tariffs is “really hard to tell without understanding what the rules are going to be and the exclusions around it.”
Trump suggested on Tuesday that he expects the tariffs will go into effect. On Wednesday, he said he thinks Mexico wants to do something about the situation, hinting that a deal was possible. Vice President Mike Pence was among a number of senior administration officials that were expected to attend a trade meeting at the White House late Wednesday with Mexican officials.
The tariffs are scheduled to go into effect on Monday.
Mexico was the third-largest goods trading partner for the U.S. in 2018 – and its second-largest export market.
U.S. goods and services trade with Mexico totaled $671 billion last year – including $371.9 billion in imports and $299.1 billion in exports, according to government data. The U.S. trade deficit for the year was $72.7 billion.