Volkswagen has issued a warning about the potential economic consequences of the US administration’s proposed tariffs on Mexican vehicle imports. The automaker cautioned that such measures could negatively impact American consumers and disrupt the global automotive industry.

The warning follows statements from President Donald Trump, who indicated plans to impose tariffs of up to 25% on vehicles from Mexico and Canada by February 1. The proposed move is part of an effort to address concerns over migration.

Volkswagen, which operates a major manufacturing plant in Puebla, Mexico, expressed its opposition to the potential tariffs. The Puebla facility, Volkswagen’s largest outside Europe, produced nearly 350,000 vehicles in 2023, most of which were exported to the United States.

“The Volkswagen Group is concerned about the harmful economic impact that proposed tariffs by the US administration will have on American consumers and the international automotive industry. We remain a strong advocate for free and fair trade,” the company said in a statement.

Tariff Impacts on the Auto Sector

Volkswagen has invested over $10 billion in the US market and highlighted that open markets have historically driven global economic growth. Analysts from Stifel estimate that 65% of Volkswagen’s US sales are sourced from vehicles made in Mexico. Should the proposed tariffs take effect, Volkswagen may face significant challenges, with the brand’s competitiveness in the US market potentially at risk.

Volkswagen shares fell by 0.5%, dropping €0.50 to €96.35, amid the uncertainty. Shares of rival Stellantis also declined by 1.3%, closing at €12.68. Stellantis, which imports about 40% of its US-sold vehicles from Mexico and Canada, has supported initiatives to strengthen US-based manufacturing. John Elkann, Stellantis chairman, recently met with Trump and senior administration officials to discuss trade and manufacturing policies.

Broader Trade Implications

The proposed tariffs could jeopardize the US-Mexico-Canada Agreement (USMCA), which succeeded the North American Free Trade Agreement (NAFTA). Both Canada and Mexico have vowed to retaliate with counter-tariffs if Trump proceeds, raising the risk of a new trade war.

Financial markets reflected these concerns, with the Canadian dollar and Mexican peso weakening against the US dollar. By mid-morning, the Canadian dollar had dropped 0.9%, while the Mexican peso fell 1.2%.

As the automotive industry braces for potential disruptions, the proposed tariffs could have far-reaching implications for trade relations and market stability across North America.

Mark Carney, former governor of the Bank of England, has announced his candidacy for the leadership of Canada’s ruling Liberal Party, following Justin Trudeau’s resignation last week. Trudeau stepped down after a challenging period marked by poor polling and mounting frustration within his own party, ending his nine-year tenure at the helm of Canadian politics.

Carney, 59, confirmed his intention to run in the Liberal leadership race set for March 9, with a general election expected shortly afterward. While the Liberals have been in power since 2015, the party faces significant challenges in the upcoming election, with the opposition Conservatives—led by populist Pierre Poilievre—holding a commanding lead in the polls.

“I’m doing this because Canada is the best country in the world, but it could still be even better,” Carney said during his announcement in Edmonton, Alberta. He highlighted key issues facing the country, including stagnant wages, climate change, escalating housing costs, and the looming threat of a trade conflict with the United States under former President Donald Trump.

Carney is expected to lean heavily on his extensive financial expertise, having led both the Bank of Canada and the Bank of England—making him the only individual to have governed two G7 central banks. “I’m here to earn your trust,” Carney stated. “I’m here to ask for your support.”

Carney’s main rival in the race for Liberal leadership appears to be Chrystia Freeland, 56, the former finance minister who resigned in frustration over disagreements with Trudeau, which in turn contributed to his departure. Following the leadership contest in March, a confidence vote in the House of Commons will likely trigger a general election later in the year.

Meanwhile, Poilievre, 45, leader of the Conservative Party, remains a strong favorite to become the next prime minister. His promises to reduce government spending, tackle crime, and eliminate carbon taxes have struck a chord with disillusioned voters. Poilievre has previously dismissed Carney as a “liberal insider” and likened him to Trudeau, calling him “Just like Justin.”

As the leadership race intensifies, the future of the Liberal Party and Canada’s political landscape remains uncertain, with both Carney and Freeland vying for the top spot in a party facing the threat of defeat in the upcoming election.