GM and Stellantis shares fall on Trump’s tariff threat to Mexico and Canada

DETROIT – Automaker Stocks general motors and Stellar fell on Tuesday after President-elect Donald Trump threatened to impose 25% tariffs on goods imported from Canada and Mexico to the US.

Such tariffs would have a major impact on the global auto industry, which has used these countries, particularly Mexico, for lower-cost vehicle production since the North American Free Trade Agreement went into effect in 1994.

UBS reports that the automotive industry is responsible for 26% of imports from Mexico to the United States, including vehicles and parts, and 12% from Canada.

Almost all of the major automakers operating in the United States have factories in Mexico; however, GM and Stellantis produce highly profitable full-size pickup trucks there.

Shares of GM, which has five large assembly plants in countries that Barclays estimates will produce 1 million vehicles this year, fell more than 8% in midday trading Tuesday.

Chrysler parent Stellantis, which has four major plants in the countries, fell more than 5%. Actions of ford engine, which has less exposure in the countries, fell 2%. Actions of toyota engine, Hondamotors and others with production in Mexico also fell at least 1%.

Trump announced that he intends to impose a 25% tariff on all US imports from Canada and Mexico via executive order when he takes office on January 20. It also announced plans to increase tariffs by an additional 10% on all Chinese goods entering the country. US

Such tariffs would be more aggressive than what Trump’s plan was expected to be, a renegotiation of the United States-Mexico-Canada Agreement, which he crafted during his first term to replace the North American Free Trade Agreement. Such a measure would end the regional free trade agreement.

Spokespeople for GM and Stellantis declined to comment Tuesday on the possible tariffs. The American Automotive Policy Council, a lobbying group for the two automakers and Ford, did not immediately respond to a request for comment.

Wall Street analysts saw the tariff plans announced by Trump as a coup de grace for countries to create leverage in any future negotiations.

“Our view is that the threat of tariffs is the instrument that Trump would use to extract from other countries the economic and political outcomes that he considers best for the United States,” Carlos Capistran of BofA Securities said in a Tuesday note. “We hope that Canada and Mexico show a willingness to negotiate on the issues mentioned above to avoid tariffs.”

Barclays’ Dan Levy agreed in a note to investors on Monday night: “We consider [the] announcement as largely negotiating tactics (as seen in 2016), and I consider such magnitude of tariffs unlikely.”

Both Trump and Democrats said they believe the trade deal needs to be changed to address possible plans for Chinese manufacturers like BYD.

Trump raised several tariff proposals during his campaign, including imposing a tariff or tax of more than 200% on vehicles imported from Mexico. He has also threatened, as he did during his first term, to increase tariffs on European vehicles.

– CNBC Michael Bloom contributed to this report.