Tariffs Impact Automaker Stocks as Canada and Mexico Impose Duties

Automotive industry stocks declined on Monday after President Trump's announcement of tariffs on goods imported from Canada and Mexico. The tariffs, effective Tuesday, impose a 25% duty on Canadian imports, while Mexico's President Claudia Sheinbaum and President Trump announced a delay in 25% tariffs on Mexico until March. Trump's tariff plan also includes 10% duties on Chinese goods, with the president indicating tariffs on Europe are "imminent" but providing no further details.

Shares of major automakers such as GM (GM), Ford (F), and Stellantis (STLA) fell at least 2% on Monday. Toyota (TM) and Honda (HMC) stocks also experienced losses. Tesla (TSLA), despite having no manufacturing operations in Canada or Mexico, saw a 5.2% decline in its stock price, possibly due to sourced parts from those regions.

Canada and Mexico play significant roles in the production of vehicles sold in the US, with Canada producing 10% and Mexico producing around 20%, according to TD Economics. American-built vehicles, including GM's Silverado and Sierra pickups and Ford's Maverick, Bronco Sport, and Mustang Mach-E, utilize parts from Mexico and Canada.

While GM expressed efforts to mitigate the impact of tariffs, auto parts pose a potential challenge. Mexico's INA auto parts trade group estimates the industry's sales reached $124.5 billion last year, with 52.3% exported to the US. Alix Partners reported that the US and Canada's total parts and components trade amounted to $224 billion in 2024.

Increased parts costs will impact prices of US-produced automobiles, likely to be passed on to consumers. TD Economics estimates an average US retail car price increase of approximately $3,000, although it depends on potential retaliatory measures from Canada and Mexico. Wolfe Research also predicts a similar price impact if tariffs are implemented.

The short timeframe before the tariffs' imposition, with many suppliers relying on real-time production based on demand, has raised concerns about the industry's ability to adjust. INA president Francisco González Díaz emphasizes the auto industry's inability to adapt to such a decision in the short term.