US automotive part tariffs come into effect as Ford forecasts $1.5bn hit and suspends financial guidance
Automotive part import tariffs are now in force in US, with Ford warning of $1.5bn loss as industry faces widespread production disruptions.
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As planned, a 25% tariff on automotive part imports into the US came into effect on 3 May, with exemptions for USMCA-compliant parts.
Based on the current information released by the White House, the following tariffs are now in place for the automotive industry:
- 25% tariff on all imported vehicles
- 25% tariff on automotive part imports (cannot be stacked on top of imported vehicle tariff). If an OEM assembles vehicles in the US (with vehicles having 85% US content, or USMCA compliant content), they can apply to offset up to 3.75% of the tariffs on parts for one year, retroactive to April 3. This offset rate would then drop to 2.5% in the second year, before being removed completely
- International Emergency Economic Powers Act tariffs, or IEEPA tariffs, for non-USMCA compliance, at first were thought to reach as high as 52.5%. These could now be dropped to 27.5%, covering the 25% vehicle import tariff and the existing 2.5% duty for non-USMCA compliance.
Because the automotive industry has long operated in North America as a single market, parts travel over the Mexican and Canadian borders multiple times before a single vehicle is completed, making it difficult to determine which parts of a vehicle are US-made.
Just yesterday, Ford became the latest OEM to withdraw its financial guidance for the year due to the uncertainty the tariffs have caused in the market, following in the footsteps of the likes of Stellantis, Mercedes and Polestar. The carmaker said it expects a $1.5 billion hit to its operating profits this year because of the impact of the tariffs.
Citing risks including industrywide supply chain disruption impacting production, the potential for future or increased tariffs in the US, changes in the implementation of tariffs including tariff offsets, and retaliatory tariffs, the company said it is suspending guidance until its Q2 earnings call.
In a statement, Ford said: “These are substantial industry risks, which could have significant impacts on financial results, and that make updating full year guidance challenging right now given the potential range of outcomes.”