DETROIT Automakers’ SharesFollowing President-elect Donald Trump’s vow to impose 25% tariffs on goods imported into the United States from Canada and Mexico, General Motors and Stellanti dropped Tuesday morning.
The global automobile industry, which has relied on Mexico in particular for lower-cost vehicle manufacture since the North American Free Trade Agreement went into effect in 1994, would be significantly impacted by such levies.
According to UBS, the automotive sector accounts for 12% of Canadian imports and 26% of Mexican imports, which include automobiles and parts.
Although Mexico is home to plants for almost all of the major American automakers, GM and Stellantis manufacture very successful full-size pickup trucks there.
During early trading Tuesday, GM’s shares fell about 7%. GM has five sizable assembly sites in the nations where Barclays predicts 1 million vehicles would be produced this year.
Stellantis, a parent company of Chrysler with four significant plants in the nations, saw a more than 4% decline. Ford Motor’s shares, which are less exposed in the countries, fell by almost 2%. The stock of companies that produce in Mexico, such as Honda and Toyota, also saw a decline of at least 1%.
When Trump takes office on January 20, he plans to use an executive order to impose a 25% tariff on all U.S. imports from Canada and Mexico. Additionally, he declared his intention to increase tariffs on all Chinese goods entering the United States by an extra 10%.
Such duties would be more extreme than Trump’s anticipated proposal to replace the North American Free Trade Agreement with a renegotiate of the US-Mexico-Canada Agreement, which he hammered out during his first term. The regional free trade agreement would be terminated.
Stellantis and GM spokespeople declined to comment on the possible levies on Tuesday. The two manufacturers’ and Ford’s lobbying group, the American Automotive Policy Council, did not immediately reply to requests for comment.
Trump’s declared tariff proposals were seen by Wall Street analysts as a volley at the nations to gain power in any future talks.
In a report released on Tuesday, Carlos Capistran of BofA Securities stated, “We believe that the threat of tariffs is the tool that Trump would use to extract from other countries the economic and political outcomes that he considers best for America.” To avoid tariffs, we anticipate that Canada and Mexico will demonstrate a willingness to engage in negotiations on the aforementioned matters.
In an analyst letter released Monday evening, Barclays Dan Levy concurred: We believe such a big amount of tariffs as improbable and consider [the] statement to be primarily a negotiation technique (as observed in 2016).
Both Democrats and Trump stated that they think the trade agreement should be modified to take into account future ambitions for Chinese producers like BYD.
During his campaign, Trump proposed a number of tariffs, one of which was to impose a charge or tax of more than 200% on cars imported from Mexico. Additionally, he has promised to raise duties on European automobiles, just as he did during his first time in office.
This report was provided to by Michael Bloom of CNBC.
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