WASHINGTON — President-elect Donald Trump's latest promise to immediately place 25% tariffs on “ALL” imports from Canada and Mexico once he takes office would dramatically impact Michigan and the U.S. auto industry, which has built its business and supply chain around trilateral agreements for decades.

Longtime Michigan politicians and industry experts speculated that Trump's announcement is a blusterous negotiating tactic from a leader who tries to squeeze the most out of relationships with allies and enemies alike. Still, many expressed significant concerns over potential tariffs.

"This is a two-alarm fire for the Michigan economy," said economist Patrick Anderson, CEO of Anderson Economic Group in East Lansing. "No state is as vulnerable as Michigan to a trade war or a sudden escalation of tariffs with Canada."

The auto industry, which nationwide imported close to $450 billion worth of automotive goods from Mexico and Canada last year, ranks high among the sectors that would suffer the most if Trump enacts the tariffs. The stock prices of General Motors Co. and Stellantis NV have already taken big hits on the heels of the incoming president's announcement. Ford Motor Co.'s stock price has so far been less impacted by the news.

Experts said Michigan's agricultural and energy sectors would suffer too, resulting in higher prices for groceries and home heating across the state.

Trump campaigned on a promise of lowering household costs. But the knock-on effect on consumers already weary from recent inflation could test Trump's popularity across the country and in Michigan, a state he won by about 80,500 votes, or 1.4 percentage points, in the November presidential election.

The once-and-future president for years has leaned on tariffs — and threats of levying tariffs — as a policy measure to address the decline of U.S. manufacturing. He claimed on the campaign trail this year that his broad tariff plans would coerce businesses to relocate to the United States and employ more Americans, but economists have widely rejected that notion and warned of severe price hikes as businesses pass their higher costs along to consumers.

His rationale for the latest tariff threat, announced Monday night in a social media post, was that "thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before."

"This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" Trump continued. "Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem."

It is not clear how exactly Trump could implement the proposed tariffs. There are a few routes he could take, according to a report from Law360. The publication noted Tuesday that he could use the International Emergency Economic Powers Act, which allows the president to set tariffs in the case of a national emergency.That route, Law360 reported, could allow for unilateral tariff increases without having to conduct an investigation or other administrative proceedings. He also could pursue tariffs under Section 301 of the Trade Act, which he used actively to levy new duties on China during his first term. He could also use Section 232 of the Trade Expansion Act, which requires a federal investigation prior to use — a tool he previously used to impose steel and aluminum tariffs.

Local, global reaction

Republican U.S. Rep. Tim Walberg, who is currently Michigan's longest-serving member of the House, cheered the announcement.

"For the past four years, the Biden-Harris administration has refused to take necessary action to address the illicit drug epidemic and illegal immigration," the lawmaker said in an emailed statement to The Detroit News.

He continued: "Since Trump’s announcement, Canada expressed an openness to taking steps to be a better partner as we work to stem the flow of drugs, human trafficking and illegal immigration. These countries must understand they need to pull their weight as our neighbors.”

Canadian Prime Minister Justin Trudeau said Tuesday he spoke to Trump on the phone, adding that he would be convening with other lawmakers and "moving forward in constructive ways."

The tariffs — a widely used economic term for taxes on imported goods — could also draw identical, retaliatory measures from Canada and Mexico, as the latter country's president said Tuesday. Such measures would make it harder yet for businesses to sell goods across the United States' northern and southern borders.

"One tariff would be followed by another in response, and so on until we put at risk common businesses,” Mexico President Claudia Sheinbaum said.

Democratic lawmakers in the United States also were wary of the tariff threat.

"In 2016, I thought Donald Trump was right about trade," Rep. Debbie Dingell, D-Michigan said in a phone interview. "NAFTA was one of the worst trade policies we had passed, and I worked with (Trump) to pass the USMCA, which continues to need some serious work. I do think we need to strengthen our trade policy."

NAFTA refers to the North American Free Trade Agreement, a trilateral trade deal between the United States, Mexico and Canada that Trump ended during his first term. USMCA refers to the U.S.-Mexico-Canada Agreement, which the Trump administration negotiated and Congress approved as U.S. law.

"I want to work with Donald Trump to strengthen USMCA," Dingell added: "But I was a little surprised at what he announced ... because I don't think people understand how intertwined the auto industry is in North America and what the immediate impact might be on the domestic industry.

She continued: "They need some time to plan for what tariffs like that would mean to production, supply chains and the consumer."

Others were more blunt and critical in their assessment.

"Tariffs are taxes," U.S. Rep. Dan Kildee, a Democrat representing Flint, Michigan, said in a statement. "President-elect Trump’s proposal will drive higher prices for consumers and contribute to higher inflation. Raising tariffs in such a broad and untargeted way will hurt our economy, including small businesses, the automotive industry, and auto suppliers."

Another Michigan Democrat, U.S. Rep. Haley Stevens, said in a statement: "Working families are going to pay the price — on gas, particularly in the Midwest; on food, particularly fresh produce. And, our automotive supply chain will be thrown into tremendous and unnecessary disruption."

'Body blow' to Detroit Three

In the case of the auto industry, it is common for unfinished vehicles to cross the borders several times to optimize costs for the likes of Ford, GM and Stellantis. All three Detroit automakers declined to comment on Trump's announcement, though Ford did comment on the status of its stock price.

Daniel Ives, a Wedbush Securities analyst, said a 25% tariff on goods would have severe impacts on the Detroit Three because of how much of their production is in Mexico.

In Mexico, GM makes gas-powered Chevrolet Silverado and GMC Sierra light-duty trucks, the all-electric Chevrolet Equinox and Blazer and the gas-powered Equinox and Blazer, the GMC Terrain and the coming Cadillac Optiq EV, according to AutoForecast Solutions LLC. GM also makes transmissions, engines and parts of the EV powertrain in Mexico.

“It would be a body blow, especially to GM,” Ives said. “Just given its significant presence in Mexico. And it comes at a time that the Detroit Big Three are seeing pressures from the Trump administration coming in, and they're going to pull the EV tax credit, and now this, so it's kind of a one, two body blow, uppercut.”

The automakers are likely looking at alternatives, talking to their lobbyists, waiting to see the next moves, “and trying to figure out if the bark is going to be worse than the bite,” Ives said. “But if this ultimately went in the way it could be proposed, it would be a nightmare.”

In Canada, GM produces light and heavy-duty trucks and Chevrolet BrightDrop EVs, as well as engines and transmissions. GM makes some of its light and heavy-duty trucks in the United States.

Ford Motor Co. makes the Ford Bronco Sport, Maverick compact truck and the all-electric Mustang Mach-E in Mexico.

Ford’s Oakville Assembly Complex in Canada is currently closed but is slated to build Super Duty trucks in the coming years. Ford builds engines in both Canada and Mexico. It also has an electric powertrain center in Mexico.

"The obvious fact here is Ford is the most committed to building in America among the major automakers and it’s not that close," company spokesperson Ian Thibodeau said in an emailed statement to The Detroit News. "We assemble the most vehicles, employ the most American workers and export the most vehicles from America to other markets.”

Stellantis NV builds the Chrysler Pacifica minivans and new Dodge Charger in Canada. In Mexico, Stellantis builds the Ram heavy-duty trucks, the Ram Promaster van, the Jeep Compass small crossover and the Jeep Wagoneer S. Stellantis also has engine and stamping operations in Mexico, and casting operations in Canada.

Lana Payne, president of Unifor, Canada’s largest union in the private sector, representing 320,000 workers, including Detroit Three autoworkers in Canada, wasn’t surprised by Trump’s tariff comments since he discussed it during the election.

If imposed, the 25% tariff would be “disastrous” for multiple sectors in Canada, Payne said.

“We have so many sectors that are very much linked and interconnected with the United States … the auto industry just being one, but a very important one,” she said. “The industry is very much shared and interconnected. This would cause any amount of grief, potentially the loss of a lot of jobs here in Canada.”

It could also hurt American families “because they're going to pay more for their goods,” Payne said.

Anderson, the Lansing-based economist, predicted that "probably every assembly plant in Ontario, Michigan, Ohio, Indiana, Illinois and Texas would be affected almost immediately by the imposition of new tariffs ... and the effects on the supply chain would follow directly after that."

The United Auto Workers, which represents Detroit Three autoworkers in the United States, did not respond to requests for comment.

Since being hired at a GM plant in Toledo, Ohio, in 1997, Tony Totty, the president of UAW Local 14, has watched jobs leave the United States for lower-cost manufacturing countries throughout his career as NAFTA took hold.

“I've seen plant closure after plant closure because of bad trade deals,” said Totty, whose local represents workers at GM's Toledo Propulsion Systems plant. “We believe in fair trade, not free trade.”

A 25% tariff “is probably not enough because they're getting more than a 25% discount on their labor. That's how we need to look at it,” he added. “We need to reexamine and reimagine our whole auto industry and every trade deal we have surrounding it, especially China.”

Other tariff potential

In a separate announcement Monday, Trump said he would levy an additional 10% tariffs on goods from China — which already faces higher import duties than other countries.

The trio of China, Mexico and Canada are responsible for about 60% — or $166 billion — of U.S. imports of automotive parts alone, according to a Detroit News analysis of data from the U.S. Census Bureau. That figure does not include whole or partial vehicles shipped stateside.

Diego Marroquín Bitar, an expert on North American trade and U.S.-Mexico relations at the Wilson Center in Washington, said that Trump's threats on tariffs could push Mexico into the arms of China as a more inviting trade partner.

"If the U.S. keeps pressuring Mexico and threatens with tariffs, what incentives does Mexico have to keep trying to get integrated with the U.S.?" he said in a phone interview. Marroquín Bitar pointed to countries like Ecuador and Peru that have recently welcomed more investment and stronger trade relationships with China.

"If the U.S. were to continue on with this or initiate tariffs, I think the incentives are there for China," he added. "Tariffs will only benefit China and Russia because they weaken North America."

Former Michigan Gov. Jim Blanchard, a Democrat who served four terms in Congress and was ambassador to Canada under President Bill Clinton, cautioned that leaders in business and government should not "overreact" to Trump's tariff threats.

"I just think it's an attention-getting thing. I think he loves the attention," Blanchard said in a phone interview. He also noted the suggestion that Trump would levy new tariffs "contravenes the (USMCA) trade deal, which he said was the greatest trade deal on the planet a few years ago."

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