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Since coming to office President Trump has ushered in sweeping policy changes that are reshaping North American trade relations. One of the most notable is the recent 25% import tariff on goods coming from the US’ neighbours Canada and Mexico, a move that has sent shockwaves through the region’s integrated economy. These tariffs will hit the EV industry due to the complex integrated supply chains, with Mexico expected to behit particularly hard as the country has positioned itself as an EV production hub for US automakers. UPDATE 04/02/2025 – Import tariffs on Mexico and Canada have been delayed for 30 days as last minute talks were held with respective leaders.
Why have US EV makers moved to Mexico?
Rho Motion EV market analyst, George Whitcombe, commented “In recent years, big players such as GM, Ford, and Stellantis have all built out EV production capacity in Mexico to target the US market.”
Mexico offers automakers many opportunities including:
- Cheaper workforce allowing vehicle to be produced at a lower cost.
- VAT exemption for US manufactures producing US goods in Mexico through the IMMEX program.
- A country with a strong history of automotive production, with conveniently located manufacturing clusters.
- Close proximity to the US for easy export.
- Thirteen free trade agreements covering 50 countries worldwide.
Automakers also moved there as under the IRA vehicles made in Mexico could also still be eligible for tax credits.
How will tariffs affect automakers producing in Mexico for the US market?
Over the last five years, Ford has produced just under 300,000 units of its Mach-e in Mexico, many of which for the US market. While GM in recent years has been expanding its EV production in the country, producing well over 100,000 units there of the Blazer and Equinox in the past two years. Alongside this Stellantis has plans to expand its EV production in the country, with production starting there for a number of models in 2024.
With tariffs, these players will likely look to deliver these units elsewhere. GM said in a recent earning report that it may potentially shift some production capacity from Mexico to the US for the domestic market, and from the US to Mexico for the international market.
Other automakers are yet to comment on the tariffs.
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What effect will the tariffs have on Canada’s EV & battery industry?
Canada in recent years has aimed to expand its EV & battery industry however it is not yet an exporting hub. Many of the big facilities that could produce valuable exports for Canada are currently under construction or are in the planning phases.
The likes of Umicore, and Ford are currently building multibillion-dollar CAM and pCAM facilities, while Stellantis through its joint venture with LGES is building a USD5 billion gigafactory in the country. Meanwhile VW is currently constructing a 90GWh gigafactory in St Thomas that is set to be the main hub for its EV batteries in North America. As well as this Honda has a production hub in the planning due to start operations in 2028.
If tariffs remain in place they may undermine the operations of these future facilities.
More Information
For more information about how tariffs may effect the EV market see our research or get in touch.
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