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Shares of major automakers tumbled on Monday after U.S. President Donald Trump imposed new tariffs on key trading partners, raising concerns over higher costs and supply chain disruptions. The U.S. slapped a 25% tariff on imports from Canada and Mexico, with an additional 10% levy on Canadian energy products and goods from China.
The automotive industry, heavily reliant on cross-border manufacturing, is particularly vulnerable. Many automakers produce vehicles in Canada or Mexico and export them to the U.S., making the tariffs a major blow to their operations. Analysts at Bernstein estimate that the U.S. automotive sector could face up to $40 billion in additional costs annually, increasing the average vehicle price by 7%. The higher costs could lead to lower sales and significantly impact earnings in 2025.
The news triggered a global selloff in auto stocks. In Asian markets, Toyota (TYO:7203), Honda (TYO:7267), and Nissan (TYO:7201) saw sharp declines due to their production links with Mexico. In Europe, Germany’s Volkswagen (ETR:VOWG_p) and BMW (ETR:BMWG), along with France’s Renault (EPA:RENA) and auto parts maker Valeo (EPA:VLOF), also suffered losses. Milan-listed Stellantis NV (BIT:STLAM), the parent company of Dodge and Jeep, dropped as well.
U.S. automakers weren’t spared, with Ford (NYSE:F) and General Motors (NYSE:GM) slipping in premarket trading. GM, which manufactures more vehicles in Mexico than any other carmaker, is particularly exposed to the tariffs.
If the trade barriers remain, the auto industry faces a potential earnings slump and higher vehicle prices, adding uncertainty to an already challenging market environment.
