Ford CEO says tariffs would devastate U.S. auto industry and benefit international rivals

The chief executive officer of Ford Motor Co. F-N +0.22% warns that U.S. tariffs on Canadian and Mexican imports would devastate the U.S. automaking industry and give a price advantage to overseas rivals.

U.S. President Donald Trump has briefly paused his plan to place 25-per-cent tariffs on all imports from his North American trading partners, but on Monday Mr. Trump said all imported steel and aluminum will be subject to a similar levy as of March 12.

Ford CEO James Farley, speaking at an investors’ conference in New York on Tuesday, said Mr. Trump’s tariffs are creating “cost and chaos” for the Detroit-based automaker, which makes cars around the world and is a major buyer of steel and aluminum, both raw and in finished parts.

“Let’s be real honest, long term, a 25-per-cent tariff across the Mexico and Canadian border would blow a hole in the U.S. industry that we have never seen,” Mr. Farley said.

“And it frankly gives free rein to South Korean and Japanese and European companies that are bringing 1.5 million to two million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.”

Sherry House, Ford’s chief financial officer, said about 90 per cent of the company’s steel and aluminum comes from U.S. sources. 

However, many of Ford’s parts suppliers use international metals, which would be subject to the tariffs. That would send up costs for Ford.

The Ford executives add their voices to a growing chorus of business leaders in North America who warn the tariffs favoured by Mr. Trump will cause inflation and job losses.

For decades, Canada and the United States have had free trade, adding Mexico to the tariff-free pact in 1994. 

“Any import tax that would affect the integrated automobile industry in North America would have a devastating impact on all the car companies because it would dramatically increase their costs,” said Fraser Johnson, a professor at Western University’s Ivey Business School.

Mr. Trump says his protectionist trade policies will bring factory jobs back to the United States and fix trade imbalances, even amid warnings that disentangling North American supply lines will be costly for consumers and businesses.

Mr. Trump’s tariffs on Canada have a darker intent.

He has repeatedly said he wants to annex Canada and would use “economic force” to do so. Canada should become the 51st state if it wants to avoid tariffs, he said.

Vehicles are Canada’s second-most valuable export, worth $51-billion in 2023. About 93 per cent of this is sent to the U.S., the Canadian Vehicle Manufacturers’ Association says.

Ref: Ford CEO says tariffs would devastate U.S. auto industry and benefit international rivals (theglobeandmail)