General Motors and Stellantis shares fell Tuesday morning after President-elect Donald Trump announced that his tariff plan would include 25% tariffs on imported goods from Canada and Mexico.
The global automotive industry could be severely affected by these tariffs as many companies have moved manufacturing plants to other countries to lower the cost of production on vehicles.
Trump’s proposed plan would inflict 25% tariffs on Mexico and Canada. The automotive industry accounts for 26% of imports from Mexico and 12% from Canada. General Motors and Stellantis, Chrysler’s parent company, produce highly popular pickup trucks in Mexico, causing its shares to plummet. Nearly every automaker based in the United States has factories in Mexico.
GM has five production plants in Mexico, and Stellantis has four. GM’s shares fell the most, dropping 7% during early trading, and Stellantis saw a 4% fall in shares. Ford shares were down 2%, and Toyota and Honda shares fell 1%.
The region currently has a free trade deal that was protected under 1994’s North American Free Trade Agreement until Trump replaced it by negotiating the United States-Mexico-Canada Agreement during his first term. A renegotiation of the USMCA was anticipated, and the announcement of the tariff plan is taken by some to be a negotiation tactic meant to push other countries into agreement.
“Our view is that the threat of tariffs is the instrument Trump would use to extract from other countries the economic and political outcomes that he considers best for America,” Bank of America Securities’s Carlos Capistran told NBC. “We expect Canada and Mexico to show willingness to negotiate on the above issues to avoid tariffs.”
Trump and Democrats share the belief that the trade deal needs to be renegotiated to stay ahead of possible plans for Chinese manufacturers, such as BYD, a China-based company that produces and sells transportation equipment, to move production into Mexico and export their products into the U.S.
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“They think they’re going to make their cars [in Mexico], and they’re going to sell them across our line, and we’re going to take them, and we’re not going to charge them tax,” Trump said on election night. “We’re going to charge them — I’m telling you right now — I’m putting a 200% tariff on, which means they are unsellable in the United States.”
There were multiple tariff proposals made throughout Trump’s campaign, including placing more than 200% tariffs on imported vehicles from Mexico and increasing tariffs on European vehicles.
This article was originally published at www.washingtonexaminer.com
