hares of major automakers tumbled Tuesday after President-elect Donald Trump announced plans to impose 25% tariffs on imports from Mexico and Canada upon taking office. The proposed tariffs would deal a significant blow to the global automotive industry, which relies heavily on these countries for lower-cost vehicle production and parts manufacturing.
Here's ads banner inside a post
Industry Shaken by Tariff Threats
The proposed tariffs target one of the most integrated industries between the U.S., Mexico, and Canada. Automakers such as General Motors (GM) and Stellantis, which have extensive manufacturing operations in these countries, saw their stocks take a sharp hit. GM shares fell 9%, closing at $54.79 per share, while Stellantis dropped 5.7% to $12.61 per share. Ford Motor Co., which has less exposure in Mexico and Canada but still produces vehicles there, saw a 2.6% decline to $11.10 per share.
Foreign automakers with production facilities in Mexico, including Toyota Motor and Honda Motor, also experienced stock declines of up to 3%.
UBS reports that the automotive industry is responsible for 26% of U.S. imports from Mexico and 12% from Canada, encompassing both vehicles and parts. These tariffs, if implemented, could disrupt the supply chain and significantly increase production costs for automakers.
Here's ads banner inside a post
Trump’s Aggressive Trade Stance
During a press conference, Trump announced his intention to impose the tariffs via executive order shortly after his inauguration on January 20, 2025. He also revealed plans to raise tariffs by an additional 10% on all Chinese imports. These measures are more aggressive than expected, marking a shift from Trump’s previous strategy of renegotiating trade agreements such as the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA during his first term.
The new tariffs would effectively dismantle the regional free trade deal, forcing automakers to reassess their production strategies and potentially relocate manufacturing back to the U.S.—a costly and complex process.
Impact on Automakers
GM and Stellantis, which rely heavily on Mexico for the production of highly profitable full-size pickup trucks, are among the most vulnerable. GM operates five major assembly plants across Mexico and Canada, producing an estimated 1 million vehicles annually, according to Barclays. Stellantis, the parent company of Chrysler, has four key plants in the region that would be directly affected.
Here's ads banner inside a post
Ford, which touts its commitment to U.S.-based manufacturing, is somewhat less exposed. In an emailed statement, the company emphasized its domestic focus:
“Ford is the most committed to building in America among major automakers. We assemble the most vehicles, employ the most American workers, and export the most vehicles from America to other markets.”
However, even Ford’s operations in Mexico and Canada would not be immune to the fallout from such tariffs.
Industry and Policy Reactions
Spokespeople for GM and Stellantis declined to comment on the tariff threats, and the American Automotive Policy Council, which represents GM, Stellantis, and Ford, did not issue an immediate response.
Analysts and industry insiders warn that the tariffs could lead to higher vehicle prices for consumers, disruptions to supply chains, and job losses in Mexico and Canada. The automotive industry, already grappling with inflation and shifting consumer demands, faces mounting uncertainty.
A Precedent for Aggressive Trade Policy
Trump’s announcement marks a return to the hardline trade policies of his first term, with the potential to upend global supply chains. During his previous presidency, he renegotiated NAFTA into the USMCA, but the new tariffs suggest a departure from multilateral agreements in favor of unilateral action.
The Road Ahead
While automakers brace for potential disruptions, the broader economic implications of such tariffs remain unclear. The proposed measures could have ripple effects across industries reliant on cross-border trade, from manufacturing to retail.
For now, automakers and investors alike are left with questions about how these policies will shape the future of North American trade and the global auto industry. One thing is certain: the stakes are high, and the industry is watching closely as the inauguration approaches.
