U.S. President Donald Trump indicated that he would suspend tariffs on auto parts, increasing the likelihood that domestic auto parts and battery manufacturers would benefit. Several auto parts companies have established factories in Mexico, and battery manufacturers are setting up in Canada to supply the U.S.
According to Bloomberg on the 14th (local time), during a meeting at the White House with El Salvador President Nayib Bukele, President Trump answered a question about whether there were other candidates for temporary tariff exemptions by saying, "We are looking for ways to help car companies."
He said, "U.S. automakers are preparing to make parts that were previously produced in Mexico and Canada in the U.S. They need time." This indicates plans to temporarily exempt tariffs on auto parts for U.S. automakers.
The Trump administration has imposed a 25% tariff on all imported finished cars since 1:01 p.m. (Korea time) on the 3rd. Initially, it was scheduled to impose a 25% tariff on auto parts starting on the 3rd of next month. However, there were concerns that imposing high tariffs on parts would heavily impact the three major U.S. automakers: General Motors (GM), Ford, and Stellantis, as U.S. automakers import a significant portion of their parts from Mexico and Canada.
According to the U.S. automotive media Automotive News, Jim Farley, CEO of Ford, and other auto industry executives have reportedly been lobbying steadily at the White House to avoid the imposition of tariffs on parts.
Should President Trump proceed with the plan to suspend tariffs on auto parts, domestic auto parts manufacturers could continue to pursue the U.S. market without tariffs. The three countries— the U.S., Mexico, and Canada— waived tariffs on automobiles and parts under the free trade agreement (USMCA), which took effect in 2020. Consequently, domestic parts companies have established factories in Mexico, where labor costs are lower, to supply nearby automakers or export to the U.S. in recent years.
According to the Korea Trade-Investment Promotion Agency (KOTRA), there are currently over 100 domestic parts companies operating factories in Mexico.
Hyundai Mobis, part of the Hyundai Motor Group, has been producing modules and several key parts in Mexico since 2014. Hyundai Wia and Hyundai Transys are producing engines and transmissions, respectively, in Mexico. HL Mando has factories for brakes and steering systems.
POSCO INTERNATIONAL is producing motor cores for electric vehicle drive motors at a factory built in Coahuila, Mexico. LG Electronics and Canadian part manufacturer Magna have also established a joint venture called LG Magna to produce drive motors and inverters in Coahuila. LS Cable & System started construction on two factories for bus ducts and electric vehicle batteries in Querétaro, Mexico, last year.
Additionally, domestic major parts manufacturers such as Hanon Systems (thermal management solutions), Hwaseong Automotive (rubber parts), Kolon Industries (airbags), and Yura Corporation (harnesses) are also mentioned as having factories in Mexico.
The complete vehicle industry anticipates that battery manufacturers and companies producing materials will also benefit. President Trump has not yet mentioned details regarding which parts will be exempt from tariffs.
However, considering that U.S. automakers rely predominantly on imports for the batteries used in electric vehicles, analyses suggest that battery and material companies are likely to be included in the list of items subject to tariff exemptions.
Domestic battery and introduction companies are primarily expanding into Canada. LG Energy Solution has already begun operations at a battery joint factory in Ontario, Canada, established in partnership with Stellantis. POSCO FUTURE M is also collaborating with GM to set up a company called Ultium Cells and is constructing a cathode material production facility in Quebec. Enchem is building an electrolyte production facility in Windsor, while Solus Advanced Materials is constructing a battery foil factory in Quebec.