Automaker Stocks Dip Amidst Trump's Tariffs

Automaker stocks experienced a decline on Monday as a result of President Trump's imposed tariffs on goods imported from Canada and Mexico. These tariffs, scheduled to take effect on Tuesday, will include 25% duties on Canadian imports, while Mexican President Claudia Sheinbaum and Trump have announced a delay in the 25% tariffs on Mexico until March. Trump's tariff plan also entails 10% duties on Chinese goods, with the president indicating that tariffs on Europe are "inevitable" but providing no further details.

Automakers Affected

Major automakers General Motors (GM), Ford (F), and Stellantis (STLA) faced stock declines on Monday, along with competitors Toyota and Honda. Even Tesla, despite not manufacturing vehicles in Canada or Mexico, witnessed a drop in its stock price, possibly due to the use of parts from those regions in their automobiles.

Impact on Production

Canada currently accounts for approximately 10% of car production in the US (around 1.5 million units), while Mexico contributes close to 20%, according to a TD Economics report. GM manufactures 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's CEO, Mary Barra, has stated that the company is striving to mitigate the impact of the tariffs. "We do manufacture trucks in Mexico, Canada, and the United States. We have the capacity in the United States to shift some of that production," she said during the company's earnings call. "We also sell trucks globally and can explore sourcing from international markets."

Auto Parts Issue

Auto parts could pose a significant challenge for automakers. Mexico's auto parts trade group, INA, estimates that the country's auto parts industry generated $124.5 billion in sales last year, with 52.3% of the parts destined for the US. INA reports that 87% of Mexican-produced auto parts are exported, with the US being the primary recipient.

A recent report by Alix Partners indicates that the combined value of parts and components from the US and Canada amounted to $224 billion in 2024. Increased part costs will drive up prices for US-built vehicles, which will likely be passed on to consumers.

Price Increases

Various estimates suggest that average US retail car prices could increase by approximately $3,000, contingent on retaliatory measures by trading partners Canada and Mexico. A Wolfe Research report predicts a similar price hike for new cars in the US if tariffs are implemented.

Challenges for Suppliers

The short timeframe between the tariff announcements and their implementation does not allow for sufficient adjustment by suppliers and manufacturers, many of whom fabricate parts in real-time based on demand. According to Bloomberg News, INA president Francisco González Díaz has stated, "The automotive industry cannot adapt to such a decision in the short term."