Reshoring the US automotive industry will require more than a one-month pause of tariffs on its closest trading partners, analysts at BofA Securities say.

On Tuesday, Washington put its new 25% tariffs on imports from Canada and Mexico on hold for automakers, following lobbying from the so-called “Big Three” – Ford, General Motors and Stellantis. The pause is expiring on 2 April, Kallanish learns.

The exemption is understood to also apply to auto parts, which represent about half of the imports. North America’s automotive supply chain sprawls across the three countries, with parts crossing borders multiple times before final assembly.

Canada’s retaliatory 25% tariffs for the industry apply to pneumatic tyres and seat covers for motor vehicles, while Mexico is expected to announce its own countermeasures on Sunday.

Analysts at BofA Securities note that this is the first indication of the Trump administration’s goals regarding the automotive industry, which is reshoring production and creating domestic jobs.

However, this may only be possible for complete vehicle assembly. Still, building out capacity and kicking off production can take at least three years, they add.

As for the other areas of production, building auto parts in the US “would be even more expensive” than paying the 25% tariffs, the analysts say. Mexico, where labour has historically been cheaper than in the US or Canada, has recorded inflation costs, which is pushing manufacturers further to Central and South America.

“It is difficult to forecast exactly how and when this new tariff conundrum is resolved. However, we continue to expect that rational economic arguments that protect and maximise US workers and companies will prevail,” the BofA analysts conclude. “Ultimately, this would mean not too much disruption to the status quo, but the process to get there could be volatile.”

On Thursday, US president Donald Trump announced that it was halting tariffs on any Mexican goods that fall under the USMCA trade agreement after a call with his Mexican counterpart Claudia Sheinbaum. The move, which now covers electronics and other products, follows the reprieve on automotive goods granted to both Mexico and Canada earlier.