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Photo: Win McNamee/Getty Images

Already having laid off the highest number of employees in nearly a decade and attempting to recover from a year in which declining global car sales likely reduced world GDP by 0.2%, the auto industry is facing a direct hit from President Trump's threatened tariffs on all goods from Mexico.

Why it matters: Mexico recently became the No. 1 trading partner with the U.S., and a significant percentage of that trade is completed by auto companies. Much of the "trade" is American auto companies exchanging parts, goods and services within entities they own, Deutsche Bank Securities chief economist Torsten Slok pointed out in a note to clients Thursday night.

  • "Trade with Mexico is basically all about the supply chain, which essentially is all about cars."

Driving the news: Trump said the U.S. would add 5% tariffs on all Mexican imports "until such time as illegal migrants coming through Mexico, and into our Country, STOP," in a tweet Thursday night.

  • The White House followed up saying that if the "crisis" at the border isn't resolved, tariffs on Mexican goods will rise by 5 percentage points each month, as high as 25% on Oct. 1.

"The auto industry was already facing trouble," as ratings agency Fitch's chief economist Brian Coulton and analyst Pawel Borowski wrote in a report released Tuesday.

  • "The risk of increased tariffs on global auto trade remains real and would be a significant drag on global GDP if it were to materialize."
  • "The global nature of auto production makes the sector particularly vulnerable to an increase in tariffs."

The big picture: In addition to hurting consumers and company bottom lines, the tariffs are likely to impact jobs.

  • The auto industry is in the midst of a "significant shift," outplacement firm Challenger, Gray & Christmas reported earlier this month, as automakers face changing consumer demands and the implementation of automation.
  • The industry announced 19,802 job cuts through April. That is 207% higher than announced through the same period last year.
  • The total announced cuts for the first four months of this year is the highest since 2009, when 101,036 cuts were announced in the auto sector through April.

American companies have fared particularly poorly, exemplified by Ford’s May 20 announcement that it would cut 10% of its salaried workforce. Six months earlier, General Motors announced the closure of five plants and 14,000 job cuts. Tesla announced over 3,000 job cuts in January.

Go deeper: The world can't afford a trade war right now

Go deeper

Biden administration takes steps to "fortify" DACA

People attend a protest supporting DACA in New York, Aug. 17. Photo: Kena Betancur/AFP via Getty Images

The Biden administration on Monday took additional steps to save the Deferred Action for Childhood Arrivals program despite ongoing legal challenges to the program.

Driving the news: The Department of Homeland Security unveiled a proposed rule designed "to preserve and fortify" DACA, which offers protection from deportation for undocumented immigrants brought to the U.S. as children. The rule is set to formally publish on Tuesday and would give the public two months to submit comments in favor of or against the Obama-era policy.

Dan Primack, author of Pro Rata
2 hours ago - World

Merkel's departure could bring influx of private investment

Christian Democratic Union party chairman and candidate for the federal elections, Armin Laschet, in front of German Chancellor Angela Merkel in Berlin on Sept. 26. Photo: Clemens Bilan/Pool/Getty Images

Angela Merkel's departure from German government may result in a massive influx of private investment.

Driving the news: The center-left Social Democratic Party, led by chancellor candidate Olaf Scholz, clinched a narrow victory in Germany's federal elections. It now will seek to form a coalition government by year-end with the Greens and the Free Democrats.

Instagram pauses development of platform for kids

Photo: Lorenzo Di Cola/NurPhoto via Getty Images

Instagram announced Monday that it is pausing its plans to develop a version of its platform for children under 13.

Why it matters: Facebook has received backlash since the Wall Street Journal published a report that showed the company knew its Instagram app is harmful to teenagers.