TORONTO — The CEO of Magna International Inc. is celebrating an exemption from tariffs on automotive components that comply with the Canada-US-Mexico Agreement.
Last month, the U.S. announced plans to impose a 25 percent tariff on all imported car components starting from May 3rd. However, on Thursday, U.S. Customs and Border Protection issued new guidelines for clarity.
“Undoubtedly, this provides significantly more clarity and ease in our planning process,” stated Magna CEO Swamy Kotagiri during an earnings call on Friday.
Nevertheless, significant ambiguity remains regarding the future of tariffs on automotive components as well as border taxes affecting the sector overall. However, he stated that the firm believes this exemption will persist.
We’re operating under that assumption and hoping to gain clearer understanding and greater certainty regarding that choice.
The tariffs are anticipated to impose approximately $250 million in additional expenses on the automotive parts leader this year; however, Kotagiri mentioned that the firm plans to transfer all these extra costs to their consumers.
The firm is seeking methods to increase the proportion of CUSMA-compliant components destined for the United States from the present level of 75 to 80 percent; however, this necessitates collaboration with both suppliers and clients.
“Some cases may necessitate design changes, validations, and approval from our customers. We will keep assessing the complete range of these opportunities,” stated Kotagiri.
The large automakers, which are Magna’s clients, are exploring methods to reduce tariff expenses; however, they do not appear eager to commit substantial funds or overhaul their manufacturing processes just yet, he mentioned.
“I believe it’s reasonable to state that every possibility is under consideration; however, based on our insights and my own conversations, this doesn’t seem like an impulsive decision,” Kotagiri explained. “Considering the scale of investment and the significance of these proposals, they’re approaching this with great deliberation.”
He mentioned that companies are leaning towards readjusting their production plans as an initial step, similar to how automakers have chosen to modify their timetables instead of making major shifts.
On Friday, GM Canada announced plans to reduce one shift at its Oshawa Assembly Plant in Ontario due to the tariffs; however, the company reaffirmed its commitment to the facility.
On Thursday, Stellantis announced that it would be closing its automobile assembly facility in Windsor, Ontario, for one week beginning May 5. This follows another shutdown of the plant for two weeks when President Trump initially implemented the tariffs in early April.
Up until now, the tariffs haven’t caused substantial financial damage to Magna; however, their most recent quarterly sales figures did show a decline.
The firm announced a first-quarter earnings of $146 million, an increase from $9 million in the corresponding period the previous year.
The sales for the quarter amounted to US$10.1 billion, which is a decrease from the US$11 billion reported in the previous year.
The firm offered updated projections for the year indicating anticipated sales increasing by $1.4 billion, ranging from $40 billion to $41.6 billion; however, this forecast does not account for possible tariff effects.
The report from The Canadian Press was initially released on May 2, 2025.
Companies featured in this article include (TSX: MG).
Ian Bickis, The Canadian Press
