Automaker Stocks Fall on Tariffs, Mexico Delay Provides Some Relief
Automaker stocks experienced a decline on Monday following President Trump's announcement of tariffs on goods from Canada and Mexico. The tariffs, scheduled to take effect on Tuesday, include 25% duties on Canada and a delayed 25% tariff on Mexico until March, as per Mexican President Claudia Sheinbaum and Trump. Trump's plan also includes 10% duties on China, with the president indicating that tariffs on Europe are likely but providing no further details.
Major automakers including GM (GM), Ford (F), Stellantis (STLA), Toyota (TM), and Honda (HMC) all closed with declines of at least 2% on Monday. However, losses were partially recovered after the announcement of the delayed Mexican tariff. Even Tesla (TSLA), despite its lack of manufacturing facilities in Canada or Mexico, saw its stock drop by 5.2%, possibly due to its reliance on parts sourced from those regions.
Canada currently accounts for approximately 10% of car sales in the US, while Mexico contributes close to 20%, as per a TD Economics report. GM manufactures the Silverado and Sierra pickups in the US, Mexico, and Canada, while Ford sells Mexican-made Maverick pickups, Bronco Sport SUVs, and Mustang Mach-E EVs in the US. Stellantis produces the Chrysler Pacifica minivan in Canada and the Dodge Charger Daytona EV.
GM, which recently released its earnings report, stated its efforts to minimize the impact of the tariffs. "From a Mexico perspective, we do build trucks in Mexico and in Canada and in the United States. And so we have the capacity in the United States to shift some of that," said GM CEO Mary Barra during the company's earnings call. "We also sell trucks globally, and so we can look at where the international markets are being sourced from."
Auto parts could present an even more significant challenge for automakers. The Mexican auto parts trade group INA estimates that the country's auto parts industry generated $124.5 billion in sales last year, with over half ($52.3%) destined for the US. INA reports that a large majority (87%) of Mexican-produced auto parts are exported, with the US being the primary recipient.
A recent analysis by Alix Partners revealed that the combined parts and components revenue from the US and Canada totaled $224 billion in 2024. Increased parts costs are likely to result in higher prices for US-built automobiles, which will likely be passed on to consumers. TD Economics projects an approximate $3,000 increase in average US retail car prices, although this estimate is contingent on potential retaliation from Canada and Mexico. A Wolfe Research report supports this estimate of a similar price hike for new cars in the US if the tariffs are implemented.
The complexities of the supply chain, with parts frequently crossing borders, create challenges in adapting to the tariffs. Suppliers and manufacturers often produce components just-in-time based on demand. "The automotive industry cannot adapt to such a decision in the short term," stated INA president Francisco González Díaz to Bloomberg News.