CEO Ford Jim Farley Warns About Donald Trump's Car Tariffs

Jim Farley, CEO of Ford (F), along with other major automotive industry leaders, warned about the proposed tariff increase by former President Donald Trump. Farley cautioned that such tariffs could significantly impact the profitability of the US auto industry, disrupt supply chains, and lead to serious economic consequences. Impact of tariffs on the automotive industry The automotive industry is particularly vulnerable to import tariffs. Tesla, led by Elon Musk, has faced significant challenges due to previous tariffs, and now Ford is voicing its concerns. Jim Farley emphasized that the industry's existence depends on close commercial relationships rather than restrictive tariffs. Farley declared, "Based on our conversations in D.C. with the Trump administration and congressional leaders, they commit to strengthen rather than weaken our national automotive industry. That is definitely our expectation." He emphasized Ford's commitment to collaborating with policy makers to ensure the strength of this industry, while highlighting the importance of the automotive sector for employment, the national economy, and security. He also mentioned the potential consequences of delaying tariffs on imports from Mexico and Canada. “There is no longer any doubt, the 25% tariffs from Canada, Mexico […] if extended will have a huge impact on our industry. Billions of dollars in industry profits are wiped out and negatively impact US employment as well as our entire value chain in the industry.” Current customs duty situation Tariffs have faced widespread criticism from both the automotive industry and U.S. consumers. Trump recently agreed to temporarily suspend the 25% tariff on imports from Canada and Mexico for 30 days, but there is still uncertainty about the long-term impacts. How can tariffs disrupt the car market? A significant portion of the cars sold in the United States contain parts manufactured in Mexico or Canada. Some car models are completely assembled in those countries before being shipped to the United States. Experts warn that tariffs could disrupt the supply chain and increase costs. UBS researchers estimate that the automotive industry accounts for 26% of total imports from Mexico to the United States and 12% from Canada. Kelley Blue Book predicts that if a 25% tariff is applied to imported cars from these countries, the average car price in the United States could increase by $3,000. This could lead consumers to choose more affordable used cars instead of buying new ones. Ford struggles financially amidst uncertain tariff situation Despite a 5% increase in Ford's sales volume compared to last year, the company's adjusted earnings per share have decreased by 7%. This decline is largely attributed to Ford's Model E electric vehicle division, reporting a $5 billion loss. The turmoil surrounding tariffs also affects Ford's stock price. Before the market opened, Ford's stock fell 6% to $9.53 as investors reacted to weaker-than-expected earnings reports. Ford produces 12% of its vehicles in Mexico and Canada, making the company particularly vulnerable if Trump enforces the proposed tariffs. To prevent, Ford has applied a cautious financial outlook for 2025. The company expects operating profit to be between $7 billion and $8.5 billion, significantly lower than the $10.2 billion recorded in 2024. Analysts have predicted a profit of around $8.3 billion, making Ford's forecast a cause for concern. Tesla struggles in uncertain tariff environment Tesla is also affected by tariffs. On Monday, Tesla's stock fell by 5%, the largest drop among the seven largest US companies by market value. Like other car manufacturers, Tesla's business model depends heavily on international trade, and a 25% tariff on imports from Mexico and Canada could have devastating consequences for the company. What is waiting ahead? When the automotive industry struggles with concerns about this tariff, the biggest question still remains - will the Trump administration reconsider its position? Currently, the temporary suspension of tariffs brings short-term relief, but without a long-term solution, the automotive industry may face increased costs, job loss, and reduced consumer purchasing power. Farley and other industry leaders will continue to advocate for US manufacturing policies without imposing unnecessary trade barriers. The coming months will be crucial in determining whether car manufacturers can overcome these challenges or whether the industry will suffer significant economic setbacks.