Carmaker Shares Fall as Tariff Threats Loom Over North America

Automaker stocks took a hit Tuesday as President-elect Donald Trump announced plans to impose a 25% tariff on imports from Mexico and Canada, shaking investor confidence. 

This move targets a vital aspect of the auto industry, which has long relied on these countries for cost-effective vehicle production. Since the North American Free Trade Agreement (NAFTA) began in 1994, Mexico has become an important hub for manufacturing, with major automakers like General Motors and Stellantis producing full-size pickup trucks in that country.  

Following Trump’s announcement, General Motors and Stellantis both saw their shares drop over 4%, while Ford, which has less exposure to Mexico and Canada, fell by nearly 2%. Other manufacturers, including Toyota and Honda, experienced smaller declines of at least 1%. 

The tariffs are a marked change from expectations of renegotiating the United States-Mexico-Canada Agreement (USMCA). The proposed tariffs could dismantle the regional free trade structure entirely, potentially inflating costs for automakers and consumers alike.  

What Does This Mean for Me?

In a move that has ratcheted up the tension, Trump also announced a 10% increase on tariffs for all Chinese imports and floated a more than 200% duty on vehicles from Mexico during his campaign. Analysts have noted the automotive sector’s heavy reliance on integrated supply chains across North America, raising concerns about the economic fallout of severing these ties.