- Ford chief executive Jim Farley told reporters in Detroit there is a 50-50 chance the three countries agree an update to USMCA, the North American trade agreement, and said he hopes bilateral deals with Canada and Mexico are reached as soon as possible because they would form the foundation for whatever follows.
- Tariffs imposed on imported automobiles last year removed the largely duty-free treatment the pact provided for North American auto trade, adding billions of dollars in costs for carmakers across the region. Trump declined to automatically renew USMCA in July, putting the agreement future in doubt.
- The two bilateral tracks are diverging. Talks between the US and Canada collapsed in August over the fine print, after which Canada was hit with 50% levies on billions of dollars of goods, while Mexican officials told Bloomberg on Wednesday they are increasingly confident of a deal cutting tariffs on key exports including autos.
- Ford shares traded at 11.98, up 2.60%. Farley was speaking at a company event focused on filling skilled trades positions.
What Happened?
Negotiations have shifted from the multilateral pact toward separate bilateral agreements expected to depend on concessions from Canada and Mexico in exchange for relief from tariffs on automobiles and metals. Farley said a solution has to be found and expressed optimism that all parties understand what is at stake, describing bilateral deals as a bridge to USMCA.
Why It Matters?
A chief executive publicly assigning odds to the political framework his industry depends on is unusual and worth taking at face value. Fifty-fifty means Farley sees a coin-flip chance that duty-free North American auto trade is not restored, which is considerably less optimistic than the sector equity prices imply. Most executives decline to quantify political risk precisely because the number is uncomfortable, so investors have a usable figure here rather than the customary expression of confidence. The sequencing he describes is the more revealing part. If bilateral agreements are the foundation for any USMCA update, then the multilateral outcome now depends on two separate negotiations, and the Canadian one collapsed in August and produced 50% tariffs rather than relief. The path to restoring the pact therefore runs through the weaker of the two tracks. The divergence creates a specific risk that a uniform outcome would not. If Mexico settles and Canada does not, North American supply chains fragment along one border while remaining integrated across the other, which is harder for manufacturers to plan around than either full restoration or full breakdown, because plants and component flows were designed on the assumption that both borders behave the same way. Canadian suppliers carry the concentrated exposure in that scenario. Ford is absorbing this alongside a costly retreat from electric vehicles, so the company faces structural pressure from two directions at once, and the billions in tariff costs already sit in reported results rather than being a future risk.
What Next?
A Mexican bilateral agreement appears closest and would be the first test of whether tariff relief on autos and metals actually materialises. The Canadian track is the harder question after August collapse, and watch whether talks resume or whether Ottawa continues diversifying toward the European Union as Prime Minister Mark Carney has been doing. Any formal USMCA renegotiation timetable would give the industry something to plan against, and its absence is itself informative. For Ford specifically, the next earnings call is where the quantified tariff cost and any assumptions about relief should appear. The November midterms sit behind the whole process, since trade policy has become entangled with domestic cost-of-living politics and the calculus may change afterwards.
Affected Tickers and Coins: F, GM, STLA, MGA
Source: Bloomberg
