In early March 2025, former US President Trump once again launched a tariff policy, announcing the imposition of high tariffs on imports from Canada, Mexico and China, among which automobiles and parts became the focus. This move quickly triggered a shock in the global automotive industry, with US stocks and European and Asian auto stocks falling collectively, and the surge in industrial chain costs and policy uncertainty becoming the focus of market attention. This article combines market data and corporate dynamics to analyze the short-term impact and long-term impact of tariff policies on auto stocks.
Tariff impact: stock price plunge and supply chain crisis
Car companies' stock prices collectively plunged
After Trump announced the tariff policy, American auto giants were the first to bear the brunt. General Motors (GM) stock price plummeted nearly 9% in a single day, Ford fell 4%, and Stellantis fell 5.68%. European automakers were also affected, with BMW, Volkswagen and other stock prices falling 1.5%-2.3%. In the Asian market, Japanese automakers such as Toyota and Nissan fell by more than 5%, and Chinese electric car companies Xiaopeng (XPEV) and Ideal (LI) also fell due to supply chain concerns. The direct cause of this plunge is the high dependence of automakers on the North American supply chain. For example, GM imports about 750,000 vehicles from Mexico each year, including Chevrolet Silverado pickups and electric models Equinox, and its profits are highly dependent on low-cost production.
Supply chain cost surge and production transfer pressure
The North American automotive industry chain is highly integrated, with an average of 6-8 cross-border transportation times for parts. Tariffs will directly push up logistics and raw material costs. Consulting firm AlixPartners estimates that if tariffs are fully implemented, the annual cost of the US automotive industry will increase by $60 billion, and 1/4 of vehicle sales will be affected. Automakers are forced to consider relocating production lines, such as Hyundai's plan to transfer Mexican production capacity to Canada or Europe, and Rivian's exploration of purchasing parts in Vietnam, but these adjustments will take several years and are costly.
Short-term difficulties and long-term adjustments for automakers
The dilemma of price transfer and profit compression
Automakers face the choice of passing on tariff costs to consumers or absorbing them themselves. Goldman Sachs predicts that if the 25% tariff is implemented, the core inflation indicator PCE will rise by 0.9%, and consumers' willingness to buy cars may decline, leading to a decline in sales. For example, if the price of pickup trucks produced in Mexico (such as Ford Maverick and Ram series) increases, it may impact the rural market in the United States, which is the main group of Trump supporters. S&P Global further pointed out that the annual profits of European and American automakers may shrink by 17%, and automakers such as Stellantis and General Motors that rely on Mexican production are at the highest risk.
Acceleration of electrification transformation and supply chain reconstruction
In the long run, tariff policies force automakers to accelerate regional layout and electrification transformation. General Motors and Tesla have increased investment in domestic battery factories in the United States to comply with the "Made in the USA" policy and obtain subsidies. But traditional automakers face greater pressure: if the United States cancels the $7,500 electric vehicle subsidy (as proposed by Trump), General Motors' electric vehicle Equinox produced in Mexico may lose its competitiveness.
Chain reaction and policy game in the global market
Risks of trade war and concerns about global economic recession
Canada and Mexico have announced retaliatory tariffs on the United States, involving goods worth 155 billion Canadian dollars, which may trigger a wider range of trade frictions. Mexican President Sheinbaum warned that tariffs will push up inflation and lead to job losses, and may even force automakers to move production to Asia. The International Monetary Fund (IMF) predicts that if the tariff war escalates, the US economic growth rate may be halved by 1.5%, and Canada and Mexico may fall into recession.
Policy negotiations and market uncertainty
Trump postponed the implementation of tariffs until March 2025, but the progress of negotiations remains a key variable. Analysts believe that the tariff threat may only be a negotiation strategy aimed at forcing Canada and Mexico to make concessions on immigration and drug issues. If the negotiations fail, US stocks may face greater selling pressure, and S&P 500 corporate profits may fall by 3% overall.
Conclusion: Survival rules in the storm
The impact of Trump's tariff policy on auto stocks is characterized by short-term fluctuations and long-term differentiation. In the short term, investors need to pay attention to:
Progress of policy negotiations: The outcome of the game between the United States, Canada and Mexico will determine the intensity of tariff implementation;
Inflation and interest rate trends: If PCE inflation exceeds expectations, the Federal Reserve may suspend interest rate cuts and further suppress consumption;
Car company financial report performance: Can GM, Ford and others offset profit declines through cost control?
In the long run, the industry will accelerate three major trends:
Supply chain regionalization: Car companies may adopt more "nearshore outsourcing" to shorten the supply chain to avoid tariffs;
Electrification technology investment: Reduce dependence on imported parts through local battery production capacity;
Policy lobbying and cooperation: Industry associations negotiate with the government to strive for subsidies or transitional buffers.
This tariff storm is both a challenge and a catalyst for industry innovation. Only car companies that flexibly adjust their strategies can take the lead in the reshaping of the global value chain.
*Disclaimer: The content of this article is for learning only, does not represent the official position of VSTAR, and cannot be used as investment advice.
