Automaker Stocks Fall Amid New Tariffs from President Trump

Automaker stocks witnessed a significant decline on Monday following President Trump's announcement of tariffs on goods imported from Canada and Mexico. These tariffs, set to take effect on Tuesday, will impose 25% duties on Canada, while Mexico's President has indicated that the implementation of similar tariffs on Mexican imports will be postponed until March.

The tariff plan also includes a 10% duty on Chinese imports, with the president suggesting that tariffs on goods from Europe are "definitely happening" but providing no further details.

Impact on Major Automakers

Major automakers such as General Motors (GM), Ford (F), Stellantis (STLA), Toyota (TM), and Honda (HMC) saw their shares close with losses of at least 2% on Monday. These losses were later partially recovered following the news of the delay in tariffs on Mexican imports. Tesla (TSLA), despite not manufacturing vehicles in Canada or Mexico, also experienced a 5.2% decline in its stock price, likely due to its reliance on parts sourced from those regions.

Dependence on Canada and Mexico

Canada and Mexico are significant suppliers of automobiles and auto parts to the United States. Canada produces approximately 10% of cars sold in the US, while Mexico supplies close to 20%. GM produces pickups and SUVs in all three countries, while Ford manufactures vehicles in Mexico for the US market.

Auto Parts Industry Concerns

Auto parts could pose a more substantial challenge for automakers. Mexico's auto parts industry generated $124.5 billion in sales last year, with 87% of its production destined for the US. A report by Alix Partners estimates that the total parts and components business from the US and Canada amounted to $224 billion in 2024.

The increased costs of auto parts are expected to translate into higher prices for US-built automobiles, which will likely be passed on to consumers. Estimates suggest that the average US retail car price could rise by approximately $3,000.

Short-Term Adjustments

The short timeframe between the announcement of tariffs and their implementation does not provide sufficient time for suppliers and manufacturers to make necessary adjustments. The automotive industry relies on real-time part production based on demand, making it difficult to adapt to sudden changes in supply chains.