President Donald Trump’s aggressive new trade policies—designed to bolster domestic manufacturing—are hitting Ford Motor Company harder than many anticipated. Despite building roughly 80% of the vehicles it sells in the U.S. domestically, Ford is projecting a net $2 billion tariff-related drag on earnings for 2025, up from a prior estimate of $1.5 billion.
Despite its domestic-heavy production footprint, Ford isn’t insulated. It reported an $800 million tariff hit in Q2, contributing to a net loss of $36 million, and revised its full‑year earnings forecast to $6.5 billion–$7.5 billion, down from previous guidance of $7.0 billion–$8.5 billion.
Made-in-America Isn’t Enough
Even though Ford produces nearly four in five U.S.-sold vehicles locally, much of its parts and materials—like steel, aluminum, and EV components—are sourced internationally. Under the White House’s new trade regime:
Foreign-made vehicle imports face new 25% tariffs, while automakers allied with USMCA countries can benefit from reduced levies as long as supplier sourcing meets content rules.
Ford continues to face steep tariffs on materials and parts—particularly aluminum and steel—which squeeze margins despite local assembly.
CEO Jim Farley warned the tariffs could “blow a hole in the U.S. industry” and force difficult choices in product planning and pricing strategy.
Thanks to trade agreements with the EU, Japan, and South Korea, many foreign automakers now pay only 15% tariffs, significantly less than the 25% levied on imports from Canada and Mexico or on non‑compliant parts.
Stellantis CEO Antonio Filosa noted that 8 million of the 16 million vehicles sold annually in the U.S.—made in Mexico or Canada with many U.S. components—now face higher tariffs than fully compliant imports from abroad.
In Q1 2025, Ford’s revenue declined 5% to $40.7 billion but still beat expectations, and net income dropped from $1.3 billion to $471 million.
- Offset strategies include:
- Transporting compliant vehicles from Mexico through bonded channels to avoid tariffs
- Halting exports to China
- Implementing internal cost reductions totaling about $1 billion planned for 2025
As of late July, Ford reinstated full‑year guidance, projecting $6.5 billion–$7.5 billion in adjusted EBIT, and affirmed $2 billion in tariff-related costs for the year.
A recent study estimates the entire auto industry could incur up to $108 billion in tariff costs, with the Big Three alone losing roughly $41.7 billion in 2025. Bernstein analysts forecast up to a 60% decline in free cash flow for the trio, due to rising production costs and shrinking margins.
Consumer pricing will likely rise: average new vehicle prices could increase by 4–8% by year-end, with some models seeing hikes up to $2,000, driven by imported parts tariffs and material cost inflation.
Ford’s commitment to “Made in America” now looks paradoxical. The company is suffering disproportionately from a tariff regime meant to favor U.S. businesses—because its deep integration with global parts supplies exposes it to amplified cost burdens. Farley’s characterization of Ford as “the most American company with a $2 billion liability” captures the irony and urgency of the moment.
Unless Washington revises or harmonizes its trade policies—particularly with key neighbors Mexico and Canada—the pain for Ford and its peers could deepen. Meanwhile, international competitors may seize market share just as consumer prices edge upward.
