Ford CEO sounds the alarm on Trump tariff ‘chaos’

Ford Motor shares moved lower in early Tuesday trading, extending their long and painful slide over the past three years, after President Donald Trump unveiled new tariffs and warned they could be extended into the broader auto industry.

Trump told reporters in Washington late Monday that he would increase tariffs on steel and aluminum imports to 25%, “without exceptions or exemptions,” starting on March 12.

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The president added that alongside his threat to impose a 25% levy on all goods coming from Mexico and Canada, which he postponed earlier this month, he was also looking at tariffs on cars, pharmaceuticals and the semiconductor sector. 

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The U.S. imports around 80% of its overall aluminum needs from abroad, according to estimates from Morgan Stanley, while around a quarter of its steel comes from Canada and Mexico.

Ford CEO Jim Farley said President Trump’s tariff plans had led to ‘a lot of cost and a lot of chaos’ for the U.S. auto industry.

Vince Mignott/MB Media/Getty Images

Ford  (F)  CEO Jim Farley, speaking to an auto-investment conference in Detroit, said that while most of the new tariff announcements on steel and aluminum could be absorbed from suppliers, the president’s recent focus on import duties had led to significant disruption for the auto sector.

Tariffs mean higher car prices: Ford’s Farley

“President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation to the U.S., and if this administration can achieve that, it would be one of the most signature accomplishments,” Farley said 

“So far, what we’re seeing is a lot of cost and a lot of chaos,” he added. 

Ford forecast adjusted earnings of between $7 billion and $8.5 billion for the coming year when it updated investors last week, but it added that it had not included the potential impact from tariff or policy changes in the outlook. 

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“From an operational standpoint, we believe a few weeks of tariffs are manageable given the rate and flow of our products,” Farley told investors on Feb. 6. Finance chief Sherry House added that coming up with a precise effect would depend on consumer demand, supply chains and the ability to quickly replace foreign-made parts with American substitutes.

But Farley also warned that “there is no question” that a prolonged tariff of 25% on goods imported from Canada and Mexico would have a “huge impact on our industry, with billions of dollars of industry profits wiped out and adverse effect on the U.S. jobs, as well as the entire value system in our industry.”

“Tariffs would also mean higher prices for customers,” Farley added.

Ford has long history in Canada, Mexcio

Ford began doing business in Mexico in the early 1920s, with its first production facility coming online in 1930 to make the group’s iconic Model T. 

Its first Canadian plant, based in Windsor, Ontario, was established even earlier, in 1904, and was tasked with producing its original Model A. 

Ford now employs around 13,000 people in both countries, most of them in Mexico. The bulk of its 72,000-strong workforce is based in the U.S. 

S&P Global Mobility suggested that the average price of a car imported from Canada or Mexico could rise by $6,250, or 24%, to an average $32,650 if Trump puts the 25% levy in place next month. 

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Furthermore, around 3.6 million units, more than a fifth of all U.S. sales, were imported from America’s partners in the U.S.-Mexico-Canada free-trade deal that Trump negoitated in 2018 and went into effect July 1, 2020.

“The automotive industry is at a critical juncture,” said S&P Global’s vice president of forecasting, Michael Robinet.

“The proposed tariffs could not only inflate vehicle prices but also disrupt production schedules, with estimates suggesting a potential 30% decrease in production for high-exposure vehicles once tariffs are enacted, even if only for the short term,” he added. 

Ford shares at last check were marked 0.3% lower at $9.22. The stock was off 36% from mid-July through the close on Feb. 10.

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