The chief executive of auto giant Fiat Chrysler has warned that the company would have to consider closing its Mexican factories if Donald Trump decides to impose his threat of tough new tariffs on imports from Mexico.

Sergio Marchionne, chief executive officer of Fiat Chrysler Automobiles, said on Monday that the entire industry was dogged by uncertainty since Trump’s election and added that if the president-elect followed through on threats to tax Mexican car imports, he would have to consider shutting factories.

“It’s possible that if the economic tariffs that are imposed by the US administration on anything that comes into the United States, if they are sufficiently large, it will make the production of anything in Mexico uneconomical and therefore we will have to move on. It is quite possible,” Marchionne said addressing reporters at the North American International Auto Show in Detroit.

Repurposing the Mexican factory would be “costly and uncertain”. Asked if he would consider investments in Mexico if he was offered substantial inducements by the Mexican government, Marchionne said it would be “incredibly imprudent on our side to try and make commitments to that country”.

A Mexican-US trade war over cars would have “relatively limited” impact on the US – but would be terrible for Mexico. “If it’s a rejection of international trade in a wider sense, the implications are much more severe,” he said.

Scaling back by US car firms is already hitting Mexico. Julian Eaves, managing director of Preferred Compounding de México, a US-owned maker of rubber compounds operating in central Mexico, told the Guardian that the economic cost could run into the hundreds of millions or billions of dollars over the next five years, if manufacturing, contracting and indirect jobs fall short of current plans.

Marchionne’s comments came shortly after Trump had praised Fiat Chrysler and Ford for announcing new investments in the US. Trump made US auto production a key part of his campaign and won in part with the backing of voters in states with the largest percentage of autoworkers.

Last week Ford abandoned plans to build a $1.6bn plant in Mexico and said it would invest $700m in a Michigan plant. On Sunday, Fiat Chrysler announced a $1bn investment in plants in Ohio and Michigan to build new SUVs and pickup trucks that will add 2,000 jobs.

“It’s finally happening – Fiat Chrysler just announced plans to invest $1BILLION in Michigan and Ohio plants, adding 2000 jobs. This after Ford said last week that it will expand in Michigan and U.S. instead of building a BILLION dollar plant in Mexico. Thank you Ford & Fiat C!” Trump posted on Twitter.

Marchionne said he had not spoken to Trump or his advisers and that the “decision has been in the works for a long time”. Fiat Chrysler – whose brands include Alfa Romeo, Chrysler, Dodge, Fiat, Jeep and Maserati – makes about 17% of its vehicles in Mexico, according to analysts.

He said it was difficult for the industry to manage in the current political environment. Trump has threatened to scrap the Northa American Free Trade Agreement (Nafta) between the US, Mexico and Canada, but so far the most detail he has given has been on Twitter.

“I don’t know if it’s a new political language, but if it is we’ll adjust to that too,” said Marchionne.

On Sunday Mary Barra, CEO of General Motors and a Trump adviser, said GM would not be changing its sourcing decisions because of Trump. “This is a long-lead business with highly capital-intensive investments – decisions that were made two, three and four years ago,” Barra told reporters in Detroit.

The company also revealed it is planning to build a newly unveiled vehicle, GMC Terrain, a crossover SUV, in San Luis Potosí, Mexico.

Barra’s comments came after the Trump threatened the company with a “big border tax” for importing some of GM’s Chevrolet Cruze compact cars from a plant in Mexico. The imported models account for some 5% of the Cruze cars sold in the US. The rest are manufactured at its Ohio factory.

On Monday Barra touted GM’s creation of US jobs. “We have more than 40 manufacturing facilities in the US and over the last two years alone, we have investment more than $11bn creating thousands of new jobs in the US, as well as recruiting technical talent,” Barra said unveiling new vehicles at the Detroit auto show.

Michelle Krebs, senior analyst with Autotrader, said the US car firms were reeling from the uncertainty Trump has created. “It takes four years to develop a vehicle, longer still to build a plant,” she said. “This is an industry that needs clarity.”