Shares in global automakers slumped on Monday as investors parsed through the implications of U.S. President Donald Trump's new tariffs on some of America's closest trading partners.
Over the weekend, Trump slapped 25% import tariffs on traditional trading partners Canada and Mexico, with Canadian energy products facing a 10% levy. A tariff of 10% was also placed on goods incoming from China.
Automakers are viewed as particularly exposed to the changes, because many manufacture their vehicles in Mexico or Canada and then export them to the U.S. The tariffs also threaten to throw sand into the gears of a complex supply chain between the three countries that has become crucial for the automotive industry, analysts have noted.
According to analysts at Bernstein, even without any changes to supply chains and production, the U.S. automotive sector could be facing additional costs of up to $40 billion per year, or roughly 7% higher cost per vehicle on average. Although carmakers have likely taken steps to mitigate the impact of the tariffs, increased prices could translate into lower sales volumes in 2025, the analysts flagged.
"If tariffs stay in place, we would expect significant lower earnings for the U.S. automotive industry," the analysts wrote in a note to clients.
Such concerns dented carmaking stocks across the world on Monday. Auto manufacturers Toyota (TYO:7203), Honda (TYO:7267), and Nissan (TYO:7201) -- all of whom construct some vehicles in Mexico and export products to the U.S. -- fell sharply in Asian trading.
Meanwhile, Europe's sector-specific Stoxx 600 autos index dropped, weighed down by declines in firms like Volkswagen (ETR:VOWG_p) and BMW (ETR:BMWG) in Germany, as well Renault (EPA:RENA) and car parts supplier Valeo (EPA:VLOF) in France. Milan-listed shares in Stellantis NV (BIT:STLAM), which oversees brands like Dodge and Jeep, also sank.
In U.S. premarket trading, shares in Ford (NYSE:F) and General Motors (NYSE:GM) both slumped. GM in particular constructs more of its cars in Mexico than any other manufacturer.
