COLORADO — One thing that remains constant in President Trump’s tariff trade war with Canada and Mexico is the continued inconsistency. And it’s causing a whiplash of uncertainty for Colorado companies.
On Tuesday, the president seemed to finally make good on his promise to enact 25% tariffs on goods from Canada and Mexico, two of the United States’ largest trading partners. Then, a day later he issued a reprieve on portions of the tariffs at the urging of the auto industry.
"We spoke with the Big Three auto dealers. We are going to give a one-month exemption on any autos coming through USMCA,” said White House Press Secretary Karoline Leavitt on Wednesday.
“Reciprocal tariffs will still go into effect on April 2. But at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage,” Leavitt said.
The USMCA refers to the United States-Mexico-Canada Agreement that President Trump negotiated himself in his first term.
On Thursday, Trump further retreated from his planned tariffs by signing orders to delay them on all products from Mexico and Canada covered by the USMCA.
Trump has said the tariffs would help boost domestic manufacturing, though economists argue they’ll raise inflation and costs for Americans.
Kevin Shaughnessy, president and CEO of Phil Long Dealerships in Colorado, said the flip-flopping is frustrating for car dealers and manufacturers because they can’t tell their customers what to expect. He said the USMCA helped build the car industry today into one that easily trades with its northern and southern partners.
“It governs trade between the countries and the auto industry. A lot of them–with a lot of other industries–are kind of built around the rules of the USMCA,” Shaughnessy said. “So there are parts that might be manufactured in the US and then exported to Canada for partial assembly, and then partial assemblies arrive back in the US, have more parts put on, and they might be shipped back to Canada for final assembly and come back.”
Each time those parts cross the border, they could face tariffs, he said. Setting expectations for the costs of vehicles at his dealership isn’t clear cut.
As a result of the tariff threats, despite the one-month reprieve, he said Phil Long Dealerships have been stocking up in their parts department.
“Because the parts that we're buying now are pre-tariff. They don't necessarily spoil, so we can keep them on the shelves,” Shaughnessy said. “It ties up some money, but it's going to allow us to protect the pricing on our vehicles a little longer. But as the tariffs go into effect, we're going to see those dwindle as time goes on.”
Shaughnessy also said President Trump’s steel and aluminum tariffs will increase the costs of vehicles. Once the pre-tariff vehicles are sold, the newer cars manufactured with steel and aluminum that’s been hit with tariffs will be more expensive.
Skyler McKinley, regional spokesperson for the American Automobile Association (AAA), said those looking to buy a car in the near future should commit sooner than later.
“If you're in the market for a new car, now is a great time to buy it. I wouldn't delay. Buy now before these tariffs go into effect,” McKinley said. And if not purchasing just yet, he cautioned to be prepared to increase the budget.
He pointed to studies he’d seen that indicated the tariffs could increase the prices of a car anywhere from $4,000 to $14,000 depending on the make and model.
McKinley said there remain plenty of open questions about manufacturing and supply chains in light of these tariffs, which he said the auto industry is expecting to finally take effect next month.
He said the Canada-US Auto Pact, signed in 1965, has enabled automakers to trade between nations for decades and Trump’s trade war threatens the supply chain.
“I think that's the important consideration here, while tariffs are typically used to incite additional production at home. The fact remains that the vertical integration of auto manufacturers across the continent dates back to 1965,” McKinley said.
“These are generations we're talking about, and that's certainly not going to flip overnight. So looking in the near term, probably nothing for the next month except a lot of fear, uncertainty, and stocking up. In the medium term, a lot of open, uncomfortable questions about what things cost and how they're made.”
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