Why Ford's made-in-America strategy hurts it in Trump's trade war

Mint

01-08-2025

There is an irony in Detroit right now: The automaker most reliant on U.S. manufacturing is among the hardest hit by tariffs.
Ford Motor, the second-largest American carmaker, prides itself on making most of its vehicles in the U.S. Some 80% of the cars Ford sells in the U.S. are built there, and it makes more vehicles in the U.S. than any other automaker.
But the Dearborn, Mich., company said the Trump administration's latest trade deals with Japan, the European Union and South Korea put it at a disadvantage with foreign rivals. Those deals now set a 15% tariff rate, which is lower than the 25% auto tariff that went into effect this spring.
Ford faces steeper tariffs on many parts as well as higher costs for imported aluminum, which is subject to 50% duties. Ford, one of the industry's biggest users of aluminum, buys the material from U.S. suppliers who pass on a chunk of their tariff costs.
Treasury Secretary Scott Bessent said in a CNBC interview that Ford's predicament is due to 'idiosyncratic" factors, as the company's F-series pickups are made with aluminum, which isn't readily available in the U.S. Bessent said the administration hopes to cut a deal with Canada to address aluminum costs in particular. 'I admire Ford," he said.
When President Trump rolled out his tariff plan in April, he railed against the tariffs other countries had imposed on U.S.-made vehicles and said his new trade policy would help restore the U.S. to be an industrial powerhouse.
U.S. automakers have long complained that they struggle to compete with foreign rivals that enjoy lower labor costs, higher levels of government support and less-stringent regulations.
'For decades now, it has not been a level playing field for U.S. automakers globally, with either tariffs or trade barriers," General Motors Chief Executive Mary Barra said earlier this year. 'So I think tariffs is one tool that the administration can use to level the playing field."
As the trade policy was rolled out, the U.S. automakers found themselves also vulnerable to the tariffs. Trump slapped duties on steel and aluminum, on automotive parts and on all imported foreign vehicles, even those made by American carmakers.
During the era of the North American Free Trade Agreement, GM, Ford and Stellantis expanded significant portions of their manufacturing capacity to Mexico and Canada. Those products became subject to tariffs.
Around half of what GM sells in the U.S. it makes abroad; Ford builds most of its vehicles in the U.S. but relies heavily on imported parts. A trade deal that helps one might weaken the other.
'Ford has more reason to complain," said Daniel Roeska, a Bernstein analyst. 'If you're now lowering tariffs and letting more cars and content flow into the U.S., that relatively disadvantages Ford more than others."
All three companies have reported big tariff costs. Ford said it paid $800 million in the second quarter. GM put its tab at $1.1 billion. Stellantis, which makes the U.S. brands Chrysler, Ram and Jeep, said tariffs shaved $350 million from its bottom line.
Tesla, which builds all the vehicles it sells in the U.S. domestically and gets most parts in North America, said tariffs cost its automotive unit $200 million.
When the Trump administration started striking deals with big trading partners in recent weeks, Ford executives cringed with each deal.
Ford said the pacts helped its competitors, from Japan's Toyota Motor and Germany's Volkswagen to GM, which builds lower-cost Chevrolets and Buicks in South Korea.
Ford said that the new 15% rate is too low to motivate competitors to move production to the U.S. 'Japan and South Korea have real advantages in labor costs, materials and currency," the company said. 'Meanwhile, Ford is facing billions due to multiple tariffs on auto parts, steel, aluminum and more that increase our costs of building in America."
The United Auto Workers and a trade group representing Detroit's automakers have criticized Trump's move to lower tariffs. 'U.S. trade policy should push automakers to build in America, with skilled, union labor," the UAW said. 'A flat 15% tariff doesn't accomplish that."
They have said cost advantages of building cars outside the U.S., such as weaker currency and cheaper labor, far outweigh the 15% tariff. Ford said the company's Ford Escape SUV cost roughly $5,000 more to make than a Toyota RAV4 SUV built in Japan.
The new deals also could give a boost to Ford's crosstown rival, GM. Analysts estimate that the new 15% tariff on imports from South Korea will lower GM's $5 billion tariff bill this year by close to $1 billion.
Ford executives said they have been in near-daily talks with administration officials, who they said have been receptive to the company's argument. 'Ford is a leading auto producer in the U.S. and the leading exporter with the most UAW workers," Chief Executive Jim Farley said on a call with analysts. 'We're very clear with the administration."
Ford and the rest of the U.S. industry are awaiting a deal with Mexico, which accounts for a big chunk of auto-parts shipments into the U.S. Trump said Thursday that tariffs on Mexican goods would remain unchanged for 90 days as the nations negotiate a trade deal.
Write to Sharon Terlep at [e-mail]