...For a while, Ford built Fusions for the U.S. market in two factories, one in Michigan and one in Mexico. Not everything is cheaper in Mexico: Labor and locally made parts cost less, but some other things (including shipping to U.S. dealers) cost more. Overall, CAR estimated that the Fusions built in Mexico cost Ford $1,200 less per car than the ones built in Michigan. That difference in cost is profit for Ford -- or looked at another way, it's margin that Ford can use to price the Fusion more aggressively, as it is doing now. At the moment, competition in the Fusion's segment (midsize sedans) is fierce. The Fusion's average transaction price is about $22,500 right now, according to J.D. Power data made available to The Motley Fool. That's still higher than the average of the Fusion's competitors (about $21,800), reflecting Ford's pricing discipline and the fact that the Fusion was recently revamped.

But Ford probably isn't making a ton of money on Fusions at that price, even Mexican-built ones. Profit margins on individual products are closely held secrets, but we can estimate that Ford's overall profit margin on the Fusion is probably around 8% right now, or in the neighborhood of $1,800 per car. (Its profit margins on smaller vehicles are almost certainly thinner.) A 35% tariff would add an average of $7,875 per car, leaving Ford deep in the hole. Ford can't just pass that on to consumers, because the Fusion competes (fiercely) with vehicles made in the U.S. and elsewhere. Even adding a few thousand dollars to its price would drop it out of consideration for a lot of potential buyers. So, why can't Ford just live with the $1,200-per-car cost disadvantage and make those Fusions in the U.S.?

The short answer is that Ford doesn't have room: Most of Ford's U.S. factories, and those of its rivals, are running near full capacity. Most are making (more profitable) trucks, SUVs, or luxury vehicles. (Ford no longer makes Fusions in Michigan; that assembly line now builds more-profitable Lincoln Continentals instead.) If Ford was forced to build Fusions in the U.S., it would have to build a new factory. But here's the thing about auto factories: They cost a lot of money no matter how busy they are, and the market for new cars is cyclical. It can cost a billion dollars or more to build a new auto factory -- but that's just the beginning. The industry rule of thumb is that an auto factory becomes profitable when it's at or over 80% of "capacity," which in the industry's lingo means two shifts working five days a week. Most of Ford's (and GM's and Fiat Chrysler's) U.S. factories are at or above capacity right now because the U.S. new-car market is very strong. That's why Detroit's profit margins in North America have been so high.