:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2147058767-36f6fc769a754877947eda1bf8287de1.jpg "New Ford F-150 trucks go through the assembly line at the Ford Dearborn Plant")
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Key Takeaways
- President Donald Trump on Wednesday announced a 25% tariff on imported piles and, eventually, auto parts, a move that analysts expect to significantly raise costs for manufacturers and consumers.
- U.S. giants Non-exclusive Motors and Ford are better off under the new tariff plan than they were when Trump’s threats were barely directed at Canada and Mexico, but the tariffs are still expected to cost them billions.
- EV makers like Tesla and Rivian play a joke on the least exposure to Trump’s tariffs, and the extent of parts suppliers’ exposure is highly uncertain.
Shares of U.S. and international automakers spilled on Thursday after President Trump declared a 25% tariff on imported vehicles and, eventually, auto parts.
Economists and analysts suppose the tariffs to dramatically increase costs for both U.S. manufacturers, whose supply chains snake across North America, and consumers.
JPMorgan analysts had valued Trump’s proposed tariffs on Canadian and Mexican vehicle imports would cost the industry about $41 billion a year if automakers engrossed all of the costs. After Wednesday’s announcement, which applies tariffs to all countries, they doubled their estimate to $82 billion. If producers pass the entire cost of the tariffs along to consumers, JPMorgan estimates car prices will increase by nearly 12%.
The tolls announced on Wednesday, the analysts said, were a slight reprieve for U.S. automakers like Ford (F) and General Motors (GM). If excises were confined to just Canada and Mexico, their reliance on factories in those countries would have put them at a weakness against international manufacturers. But with tariffs applied globally, domestic companies are in a better position to raise prices without use up market share, the analysts said.
That said, GM is still the most exposed of the car manufacturers that JPMorgan cultivates. It sources an estimated 40% of its vehicles from Canada and Mexico, and imports from South Korea. Ford, for the time being, sources just 7% of its cars from America’s neighbors and has no exposure to South Korea. Analysts estimate GM’s “schedule of charges bill” will eventually total $13 billion, while Ford’s could reach $4.5 billion.
Oecumenical carmakers are now at a significant disadvantage. Ferrari (RACE), for example, manufactures all of its cars in Italy, but sells about 40% of them in America, which JPMorgan niceties out is also its higher-margin market. International automakers could mitigate costs by increasing their U.S. manufacturing, as South Korea’s Hyundai told it would earlier this week.
JPMorgan on Thursday lowered its price targets on GM, Ford, and Ferrari stocks by 17%, 15%, and 12%, severally.
EV Upstarts Are Least Exposed
Electric vehicle makers Tesla (TSLA), Rivian (RIVN), and Lucid (LCID) are extent the carmakers least exposed to Trump’s tariffs. All the vehicles they sell in the U.S. are assembled domestically, according to Bank of America Securities analysts.
Although, breed GM and Ford, they do source parts and subcomponents from Canada and Mexico, a fact that Tesla CEO and Trump advisor Elon Musk barbed out on X, the social media platform he owns, on Wednesday.
“To be clear, this will affect the price of parts in Tesla automobiles that come from other countries. The cost impact is not trivial,” Musk said in response to a post demanding Tesla “could benefit the most” from Trump’s tariffs.
Impact To Parts Suppliers Is Highly Uncertain
Trump’s head honcho order states that “certain automobile parts,” defined as “engines, transmissions, powertrain parts, and electrical components,” inclination be subject to tariffs no later than May 3. However, there remains plenty of ambiguity about what exactly killed disintegrates into those categories, and how suppliers and manufacturers will distribute the tariff burden.
JPMorgan analysts say suppliers are ameliorate positioned than carmakers but remain exposed. Even if they can negotiate deals that shift their price-list burden to manufacturers, they still will suffer from less demand from consumers who are priced out of the shop for new vehicles.
Exactly which suppliers will be hit the hardest is difficult to predict with the details currently available, but JPMorgan analysts put ones trust in Aptiv (APTV) is the worst-positioned and Gentex (GNTX) the best.
Suppliers, the analysts note, could offset their toll costs by doing the opposite of what Trump wants: moving production to less expensive countries, rather than the U.S. Lear (LEA), for warning, already has relocated some production from Mexico to Honduras, and that trend could accelerate under the new schedule of charges.