Auto stocks are digesting President Donald Trump’s announcement that he would place 25% tariffs on “all cars that are not made in the United States,” as well as certain automobile parts.
Trump’s administration had been telegraphing plans to put tariffs on the auto industry, but the effect of those moves and mechanism for enforcement are starting to take shape. The President’s executive order said the tariffs would take effect for vehicles on April 3 and for auto parts by May 3.
Shares of the “Detroit Three” all fell. General Motors stock dropped move than 7%, while Stellantis and Ford Motor shares lost roughly 1% and more than 3%, respectively. Shares of Tesla, however, were mostly unchanged.
“In our coverage, for [original equipment manufacturers], Tesla and Ford appear to be the most shielded given location of vehicle assembly facilities although Ford does face incremental exposure on imported engines,” Deutsche Bank analysts wrote in a note Thursday. “GM has the most exposure to Mexico.”
Trump said Wednesday he would not put a tariff on vehicles that are built in the U.S.
The tariffs apply to imported passenger vehicles and light trucks, as well as key automobile parts including engines and transmissions, the White House said in a fact sheet.
Some aspects of the tariffs are still getting worked out. Auto parts that are compliant with the United States-Mexico-Canada-Agreement will remain tariff-free until the commerce secretary can consult with the U.S. Customs and Border Protection to figure out how to apply tariffs to non-U.S. content.
The United Auto Workers union cheered Trump’s announcement.
“These tariffs are a major step in the right direction for autoworkers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the U.S.,” UAW president Shawn Fain said in a statement Wednesday.
Former Missouri Gov. Matt Blunt, president of the American Automotive Policy Council — which represents Ford, GM and Stellantis — said in a statement that the AAPC was “committed to President Trump’s vision of increasing automotive production and jobs in the U.S. and will continue to work with the Administration on durable policies that help Americans.”
Still, Blunt cautioned that tariffs should be implemented in a way “that avoids raising prices for consumers and that preserves the competitiveness of the integrated North American automotive sector.”
Vehicles are made up of tens of thousands of parts, many of which cross back and forth over the U.S. border before a final product is completed.
Data and forecasting firm S&P Global Mobility reports there are on average 20,000 parts in a vehicle when it is torn down to its nuts and bolts. Parts may originate anywhere from 50 to 120 countries.
The firm also reports that 25 automakers on average produce 63,900 light-duty passenger vehicles in North America per day. A majority of those, roughly 65%, are assembled in the U.S., followed by 27% in Mexico and 8% in Canada.
Goldman Sachs analysts wrote Thursday that Trump’s 25% tariff could raise the price of imported cars by $5,000 to $15,000. If roughly 50% of parts in a U.S.-made car came from foreign sources, the tariff could raise the price of those cars by $3,000 to $8,000, they added.
President Trump had previously granted automakers a one-month tariff exemption for vehicles that comply with the United States-Mexico-Canada Agreement’s trade rules of origin.
source: cnbc.com
