Businesses have begun stockpiling materials, reviewing manufacturing footprints and preparing to raise prices as Donald Trump’s trade war has entered “uncharted territory” with sweeping tariffs on Canada, Mexico and China.
Sectors including manufacturing, retail and food were among those to highlight shocks to their supply chains after the US president imposed 25 per cent duties on imports from its two North American neighbours and raised new tariffs on China to 20 per cent. Canada and China also quickly announced retaliatory measures that US groups warned could hurt sales and jobs.
Carmakers, already struggling with stretched margins and heavy investments in electric vehicles, are expected to be hit hardest by the expanding trade war due to their complex international supply chains.
German automotive supplier Continental said it would review its production capacity in Mexico and Canada as its shares slid 12 per cent in Frankfurt on Tuesday on concerns about the tariff impact.
Continental employs more than 23,000 people in Mexico, an important production hub for car companies. It announced a $90mn investment to build its 22nd plant in the country just a year ago.
French car parts supplier Forvia also warned of an “enormous” impact for the industry. The company has extensive manufacturing operations in Mexico.
The group, with customers including Stellantis, Tesla and China’s BYD, has estimated the levies could raise annual costs by €200mn-€450mn. The figures come from details of internal discussions obtained by the Financial Times and confirmed by the company on Tuesday.
“Putting 25 per cent on significant flows of purchases for the sum of the industry automatically has a very significant impact,” Olivier Durand, Forvia’s chief financial officer, said in an interview.
Bernstein estimated an annual hit of up to $40bn on the American automotive sector if trade flows remain unchanged — which would translate to an average additional cost of $1,200 per US-made vehicle. More than $13bn in automotive cash flows would probably be wiped out for General Motors, Ford and Chrysler owner Stellantis in fiscal year 2026 if the tariffs remained in place, the firm said.
Boeing’s shares fell 6.6 per cent on Tuesday. The plane maker’s plants are in the US, but its supply chain stretches throughout North America. Jefferies analyst Sheila Kahyaoglu estimated the company spent $1bn annually on its Mexico supply chain, and its Winnipeg, Canada, factory makes parts for the 787.
US retailers also warned of looming higher prices for consumers.
Big-box retail chain Target warned of profit pressures related in part to tariffs on Tuesday. Chief executive Brian Cornell acknowledged some items might become more expensive, with prices of fresh fruits and vegetables from Mexico poised to escalate quickly. Only about half of the company’s products are made in the US.
Rick Gomez, Target’s chief commercial officer, said its merchants would have to be careful about pricing rather than passing through higher costs. As an example, he said Target might freeze the price of Christmas ornaments at $3, “so maybe we’ll take pricing up a little bit on stockings to cover where we are in Christmas ornaments”.
Corie Barry, chief executive of Best Buy, said on Tuesday that China and Mexico remained the biggest and second-biggest sources for the consumer electronics it sold. “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” Barry told analysts.
Industry experts warn the biggest uncertainty is how long these measures will be in place, and if exemptions will be introduced to alleviate the impact of them.
“This administration believes that tariffs are important in and of themselves,” said Tim Brightbill, partner at law firm Wiley Rein and an expert on international trade law.
American stocks of platinum, a raw material in manufacturing products from cars to jewellery, have jumped to their highest level since 2021 as buyers amassed it ahead of the tariffs, growing fivefold since December.
There was also broad sell-off in mining stocks on Tuesday, with uranium companies — many of which extract the metal in Canada — also down overnight. Uranium is a critical element in nuclear fuel development.
US spirits trade groups also said they were concerned that Canadian shops will take American spirits off their shelves and estimated that the tariffs against Mexico and Canada could lead to a loss of more than 31,000 jobs. Spirits are among the first category hit by the retaliatory tariffs announced by Canada on Tuesday, alongside consumer goods such as food, clothes and cosmetics, as well as electronics such home appliances.
Many of the retaliatory tariffs target American agricultural exports. China will impose a 15 per cent tariff on US chicken, wheat, corn and cotton, and 10 per cent on sorghum, soyabeans, pork and beef. Canada set levies on American imported grains, meat and dairy products.
Reporting by Ian Johnston in Paris, Patricia Nilsson in Frankfurt, Kana Inagaki, Camilla Hodgson and Madeleine Speed in London, Gregory Meyer and Guy Chazan in New York and Claire Bushey in Chicago
