After the Trump Administration announced its decision to impose massive tariffs on goods from Mexico, Canada, and China, auto stocks took a beating. Mexico and Canada build cars and car parts for several manufacturers, led by General Motors (NYSE: GM) and Ford (NYSE: F). The Wall Street Journal estimates that 16% of vehicles sold in the US in 2024 are from Mexico and 7% in Canada.
GM’s stock was hit particularly hard. After the tariff news broke on Tuesday, shares dropped 8%, ending the week down 6.4%.
It is still too early to tell how much GM and Ford will need to increase prices to offset the financial cost of these tariffs. Additionally, their overall US new car inventories might drop because it is not financially viable to import certain models at all.
Some companies may face even higher tariffs than GM and Ford. VW and Nissan import more cars and car parts from Canada and Mexico than GM or Ford do. To keep their margins intact, they may need to increase their retail prices even more than the two US companies. However, these profit savings increases could also put VW and Nissan out of the market.
One byproduct of the tariffs may be that GM and Ford will make more parts and cars inside US borders. That, in theory, would improve US employment overall, which could, in turn, help the American economy. A long list of things need to go right to offset more expensive cars.
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