Auto parts tariff exemption provides “certainty and relief,” says Magna

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This article was published 02/05/2025 (222 days ago), so information in it may no longer be current.

TORONTO – The head of Magna International Inc. is cheering a tariff exemption for automobile parts compliant with the Canada-U.S.-Mexico Agreement.

The U.S. had said last month it would start charging a 25 per cent tariff on all imported auto parts by May 3, but U.S. Customs and Border Protection guidance released Thursday provided clarification.

“Definitely that gives a lot more certainty and relief in our planning process,” said Magna chief executive Swamy Kotagiri on an earnings call Friday.

There is however still a great deal of uncertainty over the future of tariffs on auto parts, along with border taxes for the industry in general, but he said the company is assuming the exemption is here to stay.

“That is the assumption that we’re going with, and hope to get some more clarity and certainty on that decision.”

Tariffs are expected to add about $250 million in costs for the auto-parts giant this year, but Kotagiri said the company’s intention is to pass on all costs to customers.

The company is also looking for ways to boost the share of CUSMA-complaint parts headed to the U.S. from the current 75 to 80 per cent, but that it requires working with suppliers and customers to do so.

“In some instances, it will require design modifications, validation, and our customer approvals. We will continue to evaluate the full scope of these opportunities,” said Kotagiri.

Magna’s customers — the major automakers — are also looking at ways to cut tariff costs but don’t seem to be rushing to make big investments and production changes, he said. 

“It’s only fair to say that all scenarios are being considered, but from what we’re hearing, even in my discussions, I think it is not a knee-jerk reaction. Given the capital allocation and the magnitude of what’s being discussed, they’re looking at it very carefully,” Kotagiri said. 

Companies are looking to rebalance production plans as a first option, he said, as seen in decisions by automakers to adjust schedules rather than wholesale moves.

On Friday, GM Canada confirmed it planned to cut a shift from its Oshawa Assembly Plant in Ontario because of the tariffs, but that it remained committed to the plant.

Meanwhile, Stellantis said Thursday that it was halting its auto assembly plant in Windsor, Ont., for a week starting May 5, after also shutting it for two weeks when Trump first imposed the tariffs in early April. 

So far the tariffs have not created a significant financial hit to Magna, though its sales were down in its latest quarter. 

The company reported a first-quarter profit of US$146 million, up from US$9 million in the same quarter last year. 

Sales for the quarter totalled US$10.1 billion, down from US$11 billion a year earlier.

The company did provide revised guidance for the year that showed projected sales rising by US$1.4 billion to between US$40 billion and US$41.6 billion, but it excludes the potential impact of tariffs.

This report by The Canadian Press was first published May 2, 2025.

Companies in this story: (TSX: MG)