Carmakers’ shares hit as US tariffs threaten provide chains | USAEMALL.com

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Shares in US, European and Asian carmakers all tumbled on Monday after US President Donald Trump’s sweeping tariffs on Canada and Mexico threatened to disrupt supply chains that the industry relies on for the American market.

Analysts warned that the 25 per cent tariffs that Canadian and Mexican imports face from Tuesday would saddle the car industry with an extra $43bn in costs just as it grapples with a difficult transition to electric vehicles.

The industry is expected to be one of those hit hardest by the tariffs, with cars accounting for 31 per cent of the value of US imports from Mexico and 14 per cent of those from Canada, according to Barclays.

Over the past four decades, many manufacturers have established big operations in Canada and Mexico to help supply the US, one of the industry’s most important markets.

Tariffs on the $172bn gross value of vehicles and parts imported from Canada and Mexico into the US in 2023 would add $43bn in extra costs, or $2,700 to the average price of a vehicle sold in the US, according to Jefferies analyst Philippe Houchois.   

General Motors’ shares fell 7.5 per cent in pre-market trading and Ford dropped 4 per cent. The two companies are among the most exposed due to the amount of both parts and vehicles they export to the US from Canada and Mexico, according to analysts at Bernstein.

In Europe, shares in Volkswagen, Stellantis and BMW were all down between 4 and 6 per cent, which followed earlier declines by Japanese carmakers.

“If the full tariff impact were only borne by the OEMs [original equipment manufacturers], it would virtually wipe out Ford’s, GM’s and Stellantis’ net income,” said Bernstein analyst Daniel Roeska.

In a sign of how the tariffs were shaking the industry, shares in suppliers to carmakers also fell, with Paris-listed Valeo and Forvia falling 8 and 10 per cent respectively.

Earlier in Tokyo, Toyota, Honda and Nissan all fell about 5 per cent. Toyota and Honda each have large factories in Canada, while the blow to Nissan’s Mexico plants is badly timed as it tries to execute an emergency turnaround plan to stop it haemorrhaging cash.

Shares in Mazda closed down 7.5 per cent, the steepest drop of the Japanese groups. The company relies on cars exported from Mexico for a third of its US sales, according to analysis from Macquarie.

Carmakers are expected to take steps to cushion the blow from tariffs, including sourcing more parts from the US and potentially shifting capacity from Mexico and Canada. 

However, analysts warned these measures would have limited impact and that prices would ultimately increase. Bernstein also expects fewer sales of models that need to be imported to the US from Mexico and Canada.