In New York, the stock market saw a notable drop for major automakers following the announcement by President Donald Trump regarding a 25% tariff on auto imports. These new tariffs, scheduled to be enforced on April 3, are expected to impact the extensive supply chains automakers have established across North America, where production and parts typically cross multiple borders during manufacturing.
The potential financial repercussions of the tariffs could lead to an increase in vehicle prices as manufacturers attempt to offset additional costs, noted Joseph Spak, an analyst at UBS, in a communication to investors. Among the significant car manufacturers, General Motors faced a 7.4% decrease in share value. Analysts from JPMorgan suggested that GM might be the most adversely affected due to its substantial vehicle sourcing from Mexico and Canada, accounting for approximately 40% of U.S. sales.
Ford, experiencing a 3.9% decline, is considered less vulnerable since less than 10% of its vehicles are sourced outside the United States, according to JPMorgan. Stellantis, which maintains considerable manufacturing operations within North America despite being based in the Netherlands, saw a 1.3% drop. Meanwhile, shares of Honda and Toyota in the U.S. decreased by 2.2% and 2.5%, respectively.
A notable exception in the market was Tesla, whose U.S. sales come from domestic production, although CEO Elon Musk acknowledged on social media that some Tesla components are sourced internationally. Reflecting minimal impact, its shares increased by 0.4%, despite being down over 30% this year due to declining sales in primary markets.
The impact stretched beyond automobile manufacturers to auto parts suppliers as well, with declines of 3.5% for Autoliv, 5.4% for Aptiv, 3.6% for Gentex, and 8.3% for Lear. Current consumer vehicle prices are already nearing record highs, with new vehicle prices averaging $48,039 in February, close to the late 2022 record of nearly $50,000 as per Kelley Blue Book by Cox Automotive.
Other ownership-related expenses, such as vehicle insurance and repair costs, have continued to rise into 2024 and 2025, contributing to persistent inflation pressures. Economists express concern that these tariffs may exacerbate inflation fears as consumers face mounting economic worries.
In anticipation of Trump’s trade policies, automakers like General Motors have been working proactively to increase U.S. inventories since the initial trade conflict began earlier in February. Paul A. Jacobson, General Motors’ Chief Financial Officer, highlighted the complexities of permanent tariffs, discussing the potential need to reevaluate plant locations and operations during a February conference. Trump maintains that the tariffs will encourage automakers to establish more factories in the United States.
Jacobson expressed concerns over the industry’s adaptability to fluctuating policies and the substantial capital involved. He emphasized the importance of strategic stability, hoping to avoid a cycle of reacting to swiftly changing economic landscapes.