Ford’s CEO to Warn Lawmakers of ‘Devastating’ Tariff Impact

Ford Motor Co. Chief Executive Office Jim Farley will travel to Washington on Wednesday to warn members of Congress that the 25% tariffs President Donald Trump has proposed on Canada and Mexico would “blow a hole” in the US auto industry.

The impact of the tariffs, which Trump delayed for a month last week, would be “devastating” for American automakers, Farley said on Tuesday. They would also provide a “windfall” to Asian and European rivals that wouldn’t face similar levies on cars they import from their home regions, he said.

“President Trump has talked a lot about making our US auto industry stronger, bringing more production here,” Farley said at a Wolfe Research automotive conference in New York. “So far, what we’re seeing is a lot of cost, a lot of chaos.”

Farley has been among the US auto industry’s most outspoken leaders about the ramifications of steep new levies that could add $60 billion in costs to the sector, according to consultant AlixPartners. Much of those costs are likely to be passed on to consumers, which could see new-vehicle prices rise by about $3,000, Wolfe analysts have estimated.

“Let’s be real honest, long term, a 25% tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen,” Farley said.

Exports among the US, Mexico and Canada support more than 17 million jobs and a 25% tariff would lead to more than 177,000 job losses in America, according to a Feb. 3 report by the Brookings Institution. US exports of motor vehicles would fall by 25% to Canada and 23% to Mexico if the tariffs were imposed, the study found.

Farley will detail the tariff threat when he meets with members of Congress this week, which he said was his second trip to Washington in three weeks. He’ll also warn against dismantling former President Joe Biden’s signature environmental legislation, the Inflation Reduction Act, which gave federal subsidies to build electric vehicle and battery plants in the US. Ford is investing billions to build EV and battery factories in Tennessee, Ohio, Michigan and Kentucky.

“We’ve already sunk capital,” Farley said. “Many of those jobs will be at risk if the IRA is repealed, big parts of it repealed.”

Mike Manley, CEO of AutoNation Inc., one of the largest dealership chains in the US, told investors on a call Tuesday that he’s using Trump’s 2018 tariffs as a guide to how the latest levies might play out.

“There was an impact in the marketplace from a price point of view, which did subsequently impact volume,” Manley said. That impact was “mitigated” within a year or two as manufacturers cut costs and found ways to stimulate sales.

Farley said Trump’s latest flurry of threatened and imposed tariffs — including the 25% levy announced this week on foreign steel and aluminum — is creating uncertainty that is difficult to manage.

“We’re scrambling to manage the company as professionals,” Farley said. “We’re doing a lot of shoveling.”

Top photo: Jim Farley, president of Ford Motor Co. Europe, poses for a photograph during a launch event ahead of the 87th Geneva International Motor Show in Geneva, Switzerland, on Monday, March 6, 2017. The show opens to the public on March 9, and will showcase the latest models from the world’s top automakers. Photographer: Luke Macgregor/Bloomberg.