Car buyers would probably pay the cost of these charges.
"We believe that vehicle prices would undoubtedly be passed on to consumers, which will increase the price of cars sold in the United States by an average of about $ 1300," wrote Emmanuel Rosner, Deutsche Bank's auto analyst.
This price increase will damage the demand for cars, perhaps reducing car production in the US by as much as 3 million vehicles a year, down 1[ads1]8% from today's level, Rosner estimates.
If that happened, it would be the biggest battle against the American automotive industry since the big recession gave the industry a leap towards near collapse 10 years ago.
Mexico is without a doubt the largest foreign source of parts used by industry. About 16% of all auto parts used by US assembly products come from Mexico, according to an estimate from the Center for Automotive Research, a leading industry think tank.
Car dealers can't easily switch to other vendors for To avoid using parts from Mexico. Mexican parts suppliers specialize in delivering low-cost, labor-intensive components, which do not make economic sense to build elsewhere, says Kristin Dziczek, Vice President of Industry, Labor and Economy at the Center.
For example, 70% of the wiring, the collection of wires carrying power through a vehicle, comes from Mexico. Get if any wiring is made in the US. Much of the rest of the seals come to the American-Mexican border from land south of Mexico.
"You can't build the whole car and turn the wiring harness later. This is a big critical part that knocks down the assembly line if you don't."
A 25% tariff on all imports from Mexico will add about $ 28 billion a year to the cost of finished cars and parts.
Costs will rise even further if Mexico responds by impose tariffs by themselves on American goods. It would be a double blow to the American car industry, because Mexico is a big market for both cars and parts.
More importantly, US participants sent part of $ 32.5 billion to parts to Mexico, mostly to use in Mexican car factories.