By Mike Colias, Ryan Felton and Christopher Otts

The car business got a 30-day breather from tariffs on imports from Mexico and Canada. It's also in for another month of hand-wringing and strategizing for automakers, parts suppliers -- and even car shoppers.

The Trump administration paused newly announced 25% tariffs on most cars and parts that flow across the borders less than 48 hours after they took effect. The decision came after meeting with executives from General Motors, Ford Motor and Stellantis, who warned that the import taxes would hurt the U.S. companies worse than they would foreign rivals. Analysts expect a short-term sales bump of cars and trucks in March as consumers try to get ahead of tariffs unfreezing in April.

The Mexico-Canada tariffs that Trump first floated more than three months ago, just days after his election, are the most potentially damaging to auto companies in a raft of proposed import taxes. An extra 10% tariff on China took effect Tuesday. Separate 25% tariffs on steel and aluminum imports are set to take effect next week. The administration has set April 2 as the date for so-called reciprocal tariffs on several other nations.

Taken together, the flurry of planned import taxes, and their halting rollouts, have sowed uncertainty across the auto sector , not just at the big carmakers but also for thousands of parts suppliers, dealers and American car shoppers.

South Florida car dealer Bill Wallace was headed into a restaurant with his wife Monday night when he bumped into one of his customers. The man pointed to his Chevrolet Tahoe SUV and explained that the lease wasn't up until September.

"But should I pull the trigger now ahead of these tariffs?" he asked.

Wallace didn't have a definitive answer. He was stumped again when he arrived at work the next morning, hours after the tariffs took effect. On a call with general managers from his 12 dealerships, Wallace faced a barrage of questions -- and strong opinions -- about placing monthly vehicle orders with various carmakers in light of the new tariffs.

Some managers wanted to lock in unusually large orders, worried that tariffs would lead the factories to raise their prices. Others wanted to dial back, figuring consumer demand would cool.

Wallace decided not to deviate from his normal volumes. He expects a short-term bump in sales because some shoppers, like the Tahoe owner, might use the March tariff pause to buy or lease new vehicles. But he also worries about being stuck with unsold cars if the market cools.

"Whatever happens, I'd hope there's some finality to it," Wallace said. "Even if it's negative, at least you'd know what you're dealing with."

Damage done

The monthlong reprieve applies only to cars and parts that today qualify for tariff-free treatment under the existing trade pact that President Trump negotiated in his first term, the U.S.-Mexico-Canada Agreement, or USMCA.

About 85% of the passenger vehicles imported to the U.S. from Mexico in 2024 met the USMCA rules, according to federal data. That means the vast majority of vehicles and automotive parts originating from Canada and Mexico will continue to cross the border freely until early April.

General Motors, Ford Motor, Jeep-parent Stellantis and Toyota Motor have said their North American-built vehicles, such as the Chevy Silverado pickup truck, Ford Mustang Mach-E electric SUV and Toyota RAV4 SUV, will continue to qualify for tariff-free treatment -- for now.

Other carmakers, such as Germany's BMW, are still subject to the new 25% tariff that took effect this week because their cars don't meet the rules, which mandate that certain percentages of parts come from North America.

BMW sold about 33,000 cars in the U.S. last year that were built in Mexico -- its 2 Series and 3 Series, according to GlobalData. BMW's vehicles are "not currently USMCA compliant," a company spokesman confirmed.

For most car companies and auto-parts makers, Trump's tariff delay pushes off the pain of incurring import taxes that have the potential to wipe their entire bottom line. The intertwined nature of the industry's factory networks and supply chains mean that some components cross borders a half-dozen times before they are placed in a vehicle.

"A 25% tari across the Mexico and Canadian border will blow a hole in the U.S. industry," Ford chief executive Jim Farley said at an investor conference last month.

The auto sector's relatively thin margins -- less than 10% is typical for carmakers -- means it would be hard to absorb the extra costs, so higher prices are expected to be passed on to consumers.

At the low end, analysts estimate that prolonged Mexico-Canada tariffs would inflate the price Americans pay for new wheels by an average of 7%, or around $3,000, and up to $10,000 on big pricey pickups. The industry's main car lobby said tariffs could add as much as 25% on some models. Some analysts say it could take a few months before vehicle prices rise as dealerships work through their existing inventories.

The tariff threat has triggered a sort of collective paralysis, where companies are putting off capital decisions and rethinking product orders. A 30-day pause will give the sector time to lobby the Trump administration but isn't enough time to fundamentally change the business, several industry executives said.

"Damage has already been done," said Glenn Stevens Jr., executive director of MichAuto, a business group that represents Michigan's auto sector. "For an industry that operates in three-to-five-year product cycles, this level of day-to-day uncertainty is debilitating."

'Here's the goal line'

While Trump's tariff pause brought momentary relief to industry executives, it also prompted glum recognition of the wide gap between what the president wants -- more U.S. factory work and jobs -- and how quickly the industry can change.

Jon Husby, chief executive of an auto-parts supplier in Grand Rapids, Mich., that employs 1,000 people, huddled at 7 a.m. Tuesday with a task force he assembled weeks earlier to strategize around tariffs. The group reviewed how much U.S. factory space was available if the firm decides to boost domestic output of its door and tailgate handles, which it makes at several Michigan facilities. It also produces parts in Mexico and Brazil.

Husby said the company, ADAC Automotive, in recent months has discussed with its big-automaker customers bringing more factory work to the U.S. He has seen growing interest in U.S. projects in recent years, he said, in part because rising labor costs in Mexico have narrowed the cost gap with the United States.

Building a new plant can take years, though. Even relocating an assembly line from an existing factory to another can take eight months, he said.

"If we know where the goal line is, give us time to get there," Husby said. "Don't just say, 'Here's the goal line and get there today.' We can't do that as an industry."

Write to Mike Colias at mike.colias@wsj.com, Ryan Felton at ryan.felton@wsj.com and Christopher Otts at christopher.otts@wsj.com

(END) Dow Jones Newswires

March 06, 2025 11:16 ET (16:16 GMT)

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