In light of the 25% tariffs on vehicles imported by the United States, Fitch Ratings has changed its outlook for the global automotive sector from “neutral” to “deteriorated” for 2025, estimating that the tariff measure will lead to production cuts and increased costs.
This, the rating agency stated, could put pressure on the profitability of automakers and their short-term free cash flow.
On April 3, the executive order signed by Donald Trump , President of the United States, on March 26, went into effect. This order imposes 25% tariffs on vehicles, light trucks, and auto parts imported into the United States.
According to Fitch Ratings , this measure represents a significant risk for automakers that import vehicles manufactured in Mexico, Canada, Japan, Korea, and Germany to the United States.
He also pointed out that the implications for suppliers of tariffs on auto parts are less transparent due to the complexities of the supply chain.
“In addition to rising costs, there are risks of delays and supply chain disruptions affecting U.S. auto manufacturing, similar to those in 2021-2022. However, this is temporarily mitigated by the delay of tariffs on auto parts that comply with the United States-Mexico-Canada Agreement (USMCA),” he added.
The agency also adjusted its U.S. vehicle sales projection for 2025 to 15.2 million units from a forecast of 16.3 million . For Europe, the adjustment was from 13 million to 12.5 million units .
“While we expect direct tariff implications to vary across automakers, depending on their production footprint, pricing, power, and supply chain configuration, no issuer will be entirely immune to declining consumer confidence and weaker auto demand,” Fitch emphasized.
Under that scenario, the rating agency expects automakers to raise prices worldwide to offset the U.S. tariffs, although the tariff implications for brands and models may vary.
“Some automakers may struggle to raise prices enough to cover the 25% tariff and will have to make painful adjustments to production and sales plans,” he added.
The firm estimated that suppliers and automakers could share the burden of higher tariffs. “Many suppliers will try to shift the costs of the tariffs to automakers, who will have to absorb most of them through price increases,” it emphasized.
Uncertainty related to tariffs could lead to fluctuations in production volumes, which could negatively impact the cash flows of suppliers dependent on automakers.
In response to the U.S. tariffs on imported vehicles, the Mexican Automotive Industry Association (AMIA) , the National Auto Parts Industry (INA) , and the Mexican Automobile Distributors Association (AMDA)considered that this measure significantly harms the North American automotive industry.
80% of the vehicles that Mexico manufactures to send abroad are exported to the United States, so the 25% tariffs affect various automotive brands, including General Motors (GM) which in 2024 exported 830,820 units , of which 711,582 were sent to its northern neighbor, as well as Ford which sent 358,366 units to the United States , according to figures from the National Institute of Statistics and Geography (Inegi) .
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