After a Year of Tariffs, Automakers Still Hesitant to Shift Production to the US
After a year of tariffs automakers – Despite the Trump administration’s efforts to incentivize domestic manufacturing, the automotive industry remains cautious about relocating production to the United States. After a year of tariffs, automakers have not significantly accelerated their plans to bring manufacturing back home. While some companies, like Toyota, have taken small steps—such as shifting part of its Tacoma pickup production from Mexico to San Antonio—most continue to rely on existing facilities in the region. This decision by Toyota highlights a broader trend: even as tariffs have increased, the industry’s shift to US-based production has been limited, driven more by strategic business decisions than by trade policy alone.
The Cost and Uncertainty of Reshoring
Many automakers have opted to absorb the costs of tariffs rather than invest in new factories. The majority of vehicles imported into the US are still produced in current plants, not newly built ones. This trend has persisted despite the Trump administration’s push for reshoring. In 2025, 46% of cars sold in the US were imports, a slight dip from 47.7% in 2024. While some of this decline was due to the phasing out of lower-priced models like the Nissan Versa, the primary reason remains the high financial burden and uncertainty associated with establishing new operations. Building a factory requires years of planning and substantial capital, making it a risky move for companies already navigating volatile market conditions.
“It’s a huge commitment (to build a factory) and to do it on a whim would be borderline crazy,” said Ivan Drury, director of insights at Edmunds. “So the safest action is no action. Continue on, even with that increased (tariff) cost.”
USMCA and the Pressure for Change
The US-Mexica-Canada Agreement (USMCA), negotiated under Trump’s first term, now faces potential renegotiation as the administration continues to seek ways to bolster American industry. Trump recently hinted that he might abandon the deal if it didn’t better support domestic manufacturing, creating additional uncertainty for automakers. These companies depend on the free flow of parts across borders, and the prospect of future trade policy shifts has made them hesitant to commit long-term to reshoring. The American Automakers Policy Council, which represents General Motors, Ford, and Stellantis, has urged for a “swift and durable resolution” that ensures stability for investments in the sector.
Tariffs have already imposed significant financial strain on automakers. Toyota, for instance, reported $8.4 billion in duties during its most recent fiscal year, turning its North American profits into losses. Similarly, General Motors paid $3.1 billion in tariffs in 2025, while Ford’s costs reached $1 billion. These figures underscore the challenges of reshoring, as companies must balance higher costs against the benefits of reducing reliance on foreign suppliers. Toyota’s recent expansion in San Antonio, however, reflects a strategic adjustment rather than a complete pivot to US-based production. The company continues to assemble Tacomas in Mexico, emphasizing the importance of existing infrastructure in its decision-making.
Experts suggest that the industry’s resistance to reshoring is not solely due to tariffs but also to other economic factors. Labor costs in the US remain higher than in Mexico and other manufacturing hubs, while global demand for vehicles continues to drive imports. Even as prices rise, consumers are still drawn to the variety and affordability of foreign-made cars. Automakers are thus forced to weigh the short-term costs of tariffs against the long-term benefits of domestic production, often opting for the former due to its lower risk and immediate impact on operational flexibility.
As the USMCA’s future remains uncertain, automakers are likely to maintain their current strategies for the foreseeable future. While tariffs have played a role in encouraging some production shifts, the broader industry trend suggests that significant changes will require more than just trade policy. The combination of cost considerations, labor dynamics, and consumer preferences continues to shape the industry’s approach. After a year of tariffs, the path to reshoring appears to be slow, with companies prioritizing stability over bold moves in an unpredictable market.
