These Car Stocks Could Feel the Most Pain Under Trump's Auto Tariffs
Key Takeaways
Shares of U.S. and international automakers tumbled on Thursday after President Trump declared a 25% tariff on imported vehicles and, eventually, auto parts.
Economists and analysts expect the tariffs to dramatically increase costs for both U.S. manufacturers, whose supply chains snake across North America, and consumers.
JPMorgan analysts had estimated Trump’s proposed tariffs on Canadian and Mexican vehicle imports would cost the industry about $41 billion a year if automakers absorbed all of the costs. After Wednesday’s announcement, which applies tariffs to all countries, they doubled their estimate to $82 billion. If manufacturers pass the entire cost of the tariffs along to consumers, JPMorgan estimates car prices will increase by nearly 12%.
The tariffs announced on Wednesday, the analysts said, were a slight reprieve for U.S. automakers like Ford ( F ) and General Motors ( GM ). If tariffs were confined to just Canada and Mexico, their reliance on factories in those countries would have put them at a disadvantage against international manufacturers. But with tariffs applied globally, domestic companies are in a better position to raise prices without losing market share , the analysts said.
That said, GM is still the most exposed of the car manufacturers that JPMorgan follows. It sources an estimated 40% of its vehicles from Canada and Mexico, and imports from South Korea. Ford , meanwhile, sources just 7% of its cars from America’s neighbors and has no exposure to South Korea. Analysts estimate GM's "tariff bill" will eventually total $13 billion, while Ford's could reach $4.5 billion.
International carmakers are now at a significant disadvantage. Ferrari ( RACE ), for example, manufactures all of its cars in Italy, but sells about 40% of them in America, which JPMorgan points out is also its higher-margin market. International automakers could mitigate costs by increasing their U.S. manufacturing, as South Korea's Hyundai announced it would earlier this week.