Inside the US tariff turmoil reshaping North American vehicle production
As USMCA trade rules unravel and 50% tariffs hit US-Canada auto trade, Ian Henry tracks how Toyota, Honda, Ford, Stellantis, Hyundai, Volvo and GM are responding – from new US plants to a proposed JLR-Stellantis Defender collaboration
President Trump’s controversial tariff regime has disrupted long-established trading and operational practices in North America’s automotive manufacturing sector. The disruption is a direct consequence of the tariff policy which is intended to encourage vehicle manufacturers and suppliers to relocate to the US, whether from Canada or Mexico, or further afield. The situation has been compounded further by the ending of the EV support schemes under previous President Biden, the failure of EV demand to meet initial expectations and the multi-billion-dollar losses which Stellantis and other vehicle companies have booked as a result of cancelling EV programmes.
The first round of increased tariffs was announced in April 2025. Since then, the goalposts have shifted, including several changes to the tariff rates applied to imports from different countries; meanwhile US courts have struck out the initial tariff regime, meaning that the US government has had to organise an extensive and expensive programme of refunding tariffs levied against the law.
While the tariff situation between the US and Europe & the UK is relatively stable with the US levying 15% or 10% respectively on vehicle imports, there is a great deal of uncertainty and turmoil regarding intra-North American trade
President Trump has responded by finding different legal routes by which he can still levy tariffs, so the effect is broadly similar, if not worse. The automotive industry, which prizes stability for long term investment, has been thrown into turmoil by the events of the last year or so, with more disruption likely for some time to come.
Uncertainty surrounding USMCA
While the tariff situation between the US and Europe & the UK is relatively stable with the US levying 15% or 10% respectively on vehicle imports, there is a great deal of uncertainty and turmoil regarding intra-North American trade. The former NAFTA arrangements were replaced by the USMCA deal in 2020, but this established modus operandum has been thrown up in the air with a breakdown in US-Canadian trade negotiations. Both sides now levy 50% tariffs on each other’s automotive imports and exports. Some of these can be avoided if the parts or vehicles comply with existing USMCA arrangements but the time and costs involved in proving compliance are significant; press reports have cited Toyota US executives suggesting that these costs can amount to more than US$1000 a vehicle. This is not sustainable. Reports suggest that Toyota alone faces more than US$9bn in US import tariff costs this year.
Toyota shifts investment to support US pick-up production
In terms of practical consequences. Toyota is an interesting case. The company is renowned for taking the long-term view and not rushing into decisions. When the increased tariffs were announced last year, Toyota said it would not move production from Mexico to the US and would continue to import Tacoma pick-ups. However, a year or so into the new world order and Toyota has changed its mind. Production of Tacomas made in Baja California will switch to a new assembly line at Toyota’s plant in San Antonio, Texas, but not before 2030. Moreover, this new assembly line will cost US$3.6 billion. Complying with President Trump’s wishes is neither quick nor inexpensive. In the interim, Tacomas will continue to be imported from Baja California and a second Mexican plant, at Guanajuato, and tariffs will have to be absorbed one way or another. Notably, the Guanajuato plant still expected to supply the US with Tacomas even once the Texas line has been opened. US demand for Tacomas is such that two plants, one in Texas and one in Mexico will be needed. Absorbing tariffs on Mexican-made vehicles will need to be factored into Toyota’s thinking over the long term.
Ford’s near-term investment plans for the US are more a reflection of the impact of the removal of the Biden-era EV support schemes than a response to Trump’s tariffs
Honda’s US investment dilemma
Meanwhile, Honda is considering adding an eighth North American factory to meet US demand especially. However, continued uncertainty regarding long-term trade policy means Honda is delaying a decision on where, when or even whether it might build this plant. The company has said the potential new factory would need to be operational in the early 2030s. However, having booked multi-billion-dollar losses on cancelled EVs which were due to be made in the US, Honda is wary of committing further funds until it has sight of certainty or at least more stability regarding US trade and other industrial policies.
While Honda remains in a decision-making flux, other vehicle companies have – like Toyota – actually made decisions to boost US production, with Ford, Stellantis (including potentially with JLR), Hyundai and Volvo amongst those committing to expanding US production. These moves show how trade and government policy can have a significant and direct impact on vehicle company strategy and the moves so far announced involve a combination of re-locating production from China, Korea and Europe or re-committing to existing US operations.
Ford still pursuing new EV products
Ford’s near-term investment plans for the US are more a reflection of the impact of the removal of the Biden-era EV support schemes than a response to Trump’s tariffs. It is true that Ford will repatriate production of Lincoln models from China to the US, but this will not actually take effect until 2030. In the meantime, Ford will continue to pay a 52.5% tariff on Lincoln Nautilus vehicles from China; will be made in US 2030.
However, at home Ford is investing in its new Universal Electric Vehicle Platform (UEVP), which will eventually provide the basis for at least five models, the first of which is the Fathom, a US$30,000 electric pick-up. It is also expanding the Bronco range, adding a hybrid model in 2027, and a pick-up by 2030. Bronco appears likely to become a sub-brand in its own right. The Lightning EV pick-up has been dropped and will be replaced in due course by an EREV version and there will also be a large EREV SUV, bigger than the Expedition, and this will be made at the new Blue Oval site Tennessee; this factory will also produce the new Ranger pick-up. Most of Ford’s investment in North America has always been in the US and Trump’s policies have only reinforced that, although the reported new four-door Mustang will likely be built in Hermosillo in Mexico, replacing the current Mustang Mach-E EV.
Stellantis refocusses on US and collaborates with JLR
Having booked substantial losses on its EV programmes, Stellantis is beginning to make some new investment in the US. The first example is the US$800m at the previously shuttered Belvidere plant, near Chicago. This is for the new Cherokee which will be made on the STLA One platform; trial build commences in H1 2028, with full production in H2 2029.
Potentially of greater significance is the proposed collaboration with Jaguar Land Rover (JLR). JLR volumes remain too low to support the company building its own US factory, but JLR needs production capacity in the US to avoid import tariffs if possible. Despite JLR’s pivot in Europe to monocoques and EV technology, in the US, JLR sees a real opportunity to expand into new segments. In particular, it seems continued demand for rugged body-on-frame vehicles.
Stellantis and JLR are now working plans to make a new series of Defender-branded products at Stellantis factories in the US, using Stellantis platforms. No definitive plans have been confirmed but a Land Rover version of the Wrangler and/or Gladiator models seem realistic possibilities. We can expect firmer details on this proposal by the end of 2026.
Hyundai looks to boost US production capacity
Hyundai is making a total investment in the US of cUS$26 billion across the Hyundai, Kia and Genesis brands, and in the construction of a steel plant and a robot factory. It has expanded plans for the Metaplant in Georgia and will raise production capacity in North America well above the initial 500,000 upa level to between 700-800,000 by 2028. Its expanded commitment to the US is expected to see as many as 25,000 new jobs created in US manufacturing. If this happens, as would seem likely, we can expect to the Trump or successor administration citing this as a real success story for the tariff and “Make America Great Again” policies.
Volvo adds XC60 to South Carolina plant
On a lesser scale, Volvo is expanding production at its under-utilised plant in South Carolina. Production last year was only 30,000, against capacity of 150,000. Volumes for the EX90 have not met initial expectations and long-term production of the Polestar 3 seems unlikely since the US administration withdrew approval for the Chinese-designed and developed Polestar range to be sold in the US. To boost production, utilisation and get around the tariff wall, at least 20,000 XC60s will be added to the factory’s line-up although it is not entirely clear how far this can avoid tariffs as the US-assembled models will still have a significant European or non-US content ratio. Longer term, by late 2028, a third Volvo model, a 7-seat, three row model, bigger than the XC90/EX90 will be produced in the US for the US market; the name has not been revealed yet it is likely to be either XC100 or XC120.
GM remains US-focused but international activities continue
Like Ford, the bulk of GM’s North American business has been inside the USA, but GM has recently announced US$1billion investment commitment to Canada; it will add the heavy-duty Sierra pick-up to the Oshawa plant’s portfolio (where the similar Silverado is already made); it will expand a powertrain facility and a stamping plant in Canada and has committed to not close the current unused CAMI plant at Ingersoll. This plant has been “promised” work for the Canadian Defence Forces once the Canadian government decides on its plans for defence vehicles. Meanwhile, GM has extended its agreement with SAIC in China through to 2046, including the production of Chevrolet models for export markets rather than for China itself. Even now, despite having left Europe, India and South Africa behind some years ago, GM is not giving up entirely on its international ambitions.
The disruption and uncertainty are occurring in an environment where the industry’s margins are under threat as never before. It remains far from clear as to what shape the sector will be in once all the current turmoil has settled down
OEMs search for signs of stability in the US
So why are these VMs all expanding US production? In essence it comes down to seeking shelter from the storm of tariff wars and widespread policy shifts by the US government. Sanctuary inside the US tariff wall and avoiding having to hedge dollar funds are the key reasons behind JLR’s planned tie-up with Stellantis. For Ford, meanwhile, the decision to relocate Lincoln production from China to the US is, by Ford’s own admission, a direct response to the changed tariff environment, although this switch will not come into effect before 2030. As with Toyota and the Tacoma, moving production from China to the US is not economic during a model’s life cycle so in the interim penal tariffs of over 50% on Chinese-made vehicles have got to be absorbed, partly by Ford, and partly by its customers.
The turmoil in the wider North American automotive manufacturing sector is clearly a direct response to the current administration’s tariff policy. The costs of the tariff policy come on top of the costs incurred by the likes of Honda and Stellantis who have booked multi-billion-dollar losses as a direct result of another policy decision, namely the ending of the Biden-era EV subsidies and wider industry support.
The Trump tariffs have led vehicle companies increasing US production volumes and capacity in some cases; further moves along the lines of those set out above are highly likely. However, while vehicle companies make their plans, the financially challenged supply base is less able to move so fast, if at all, and especially not without help from their vehicle company customers. The nature of the NAFTA/USMCA arrangements means that North American vehicle plants rely on suppliers located not just in the US, but also in Canada and Mexico, and indeed further afield. Some parts used in US-assembled vehicles can start life north or south of the US border and cross one or both borders more than three times during their manufacturing and assembly process to create a finished product; assessing US content or regional value-added to assess whether the components themselves should be subject to tariffs or not is complex and costly.
The disruption and uncertainty are occurring in an environment where the industry’s margins are under threat as never before. It remains far from clear as to what shape the sector will be in once all the current turmoil has settled down, assuming it does. On the surface vehicle production inside the US looks set to rise, but at what cost, especially to US’ companies’ wider operations and finances?
