President Donald Trump has delayed tariffs on automobile imports from Canada and Mexico for one month, following requests from executives at the Big Three automakers – General Motors, Ford, and Stellantis. This reprieve comes less than two days after Trump issued 25% tariffs on all goods from the U.S.'s neighbors, which had previously been duty-free under a North American trade agreement.

The automakers have complex supply chains and operate several manufacturing facilities in Mexico and Canada. For instance, GM produces its Chevy Equinox in Mexico and Canada, and both Ford's Lincoln Nautilus SUVs and Stellantis's Dodge Chargers are made in Ontario. Multiple automotive suppliers also have factories in the two countries. The tariffs would have significant implications for these companies, disrupting their supply chains and increasing production costs.

The tariffs would also have a significant impact on car prices, which are already at historic highs. According to Jeff Schott, senior fellow at the Peterson Institute for International Economics, the tariffs could send sticker prices skyrocketing by as much as $12,000. This could lead to less demand, leaving dealers stuck with unaffordable cars on their lots. The automotive industry is already facing challenges, and the tariffs would only exacerbate the issue.

In an address to Congress on Tuesday, Trump urged manufacturers to move their operations to the United States. However, Ford CEO Jim Farley has expressed concerns about the feasibility of shifting production. Farley noted that Ford could withstand tariffs in the short term, but if they persisted, they "would blow a hole in the U.S. industry that we've never seen." The company doesn't have excess capacity at its plants to shift production, making it difficult to comply with Trump's request.

According to data from Edmunds.com, through February, nearly half of all new vehicles sold in the U.S. were built in the U.S., but 17.4% of them were built in Mexico, and 7.4% in Canada. This highlights the significance of the automotive trade between the U.S. and its neighbors. The tariffs would not only affect the automakers but also have broader implications for the economy.

The delay in tariffs provides a temporary reprieve for the industry, but the long-term implications of the trade agreement remain uncertain. The automakers will continue to lobby for a more permanent solution, and the industry will be watching closely as the situation unfolds. As the trade landscape continues to shift, one thing is clear – the automotive industry is at a critical juncture, and the decisions made in the coming months will have far-reaching consequences.