A truck trailer transports Toyota cars for delivery while queuing at border customs for entry into the U.S. at the Otay border crossing in Tijuana, Mexico, May 31, 2019.
Jorge Duenes | REUTERS
DETROIT – Automaker stocks General Motors And Stellar The price fell on Tuesday after President-elect Donald Trump threatened to impose 25% tariffs on goods imported into the United States from Canada and Mexico
Such tariffs would have a significant impact on the global automotive industry, which has used these countries, particularly Mexico, to produce vehicles at lower cost since the North American Free Trade Agreement came into effect in 1994.
UBS reports that the automotive industry accounts for 26% of imports from Mexico to the U.S., including vehicles and parts, and 12% from Canada.
Almost every major automaker operating in the United States has factories in Mexico, although GM and Stellantis produce highly profitable full-size pickup trucks there.
Shares of GM, which has five major assembly plants in the country that Barclays estimates will produce 1 million vehicles this year, closed Tuesday down 9% to $54.79 a share.
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Shares of GM, Ford and Stellantis.
Chrysler parent Stellantis, which has four major plants in the country, fell 5.7% to close at $12.61 per share. Shares of Ford engine, which has less exposure to those countries but makes vehicles in both, closed down 2.6% to $11.10 per share. stocks Toyota engine, Honda engines and others with production in Mexico closed with declines of 3% or less.
Trump announced that he intends to impose a 25% tariff on all U.S. imports from Canada and Mexico via executive order when he takes office on January 20. He also announced plans to increase tariffs by another 10% on all Chinese goods imported into the US
Such tariffs would be more aggressive than Trump's plan to renegotiate the United States-Mexico-Canada agreement he negotiated during his first term to replace the North American Free Trade Agreement. Such a move would end the regional free trade agreement.
Spokespeople for GM and Stellantis declined to comment on the possible tariffs on Tuesday. The American Automotive Policy Council, a lobbying group for the two automakers and Ford, did not immediately respond for comment.
“The obvious fact here is that Ford is the most committed to building in America among the major automakers, and this isn't that close. We build the most vehicles, employ the most American workers and export the most vehicles from America to other markets,” Ford said in an emailed statement.
Wall Street analysts viewed Trump's announced tariff plans as a shot across countries' bows to exert pressure in upcoming negotiations.
“We believe the threat of tariffs is the tool Trump would use to extract from other countries the economic and political outcomes he believes are best for America,” Carlos Capistran of BofA Securities said in a note Tuesday. “We expect Canada and Mexico to demonstrate a willingness to negotiate on the above issues to avoid tariffs.”
Dan Levy of Barclays agreed in an investor note Monday evening: “We’ll see [the] “The announcement is largely a negotiation tactic (as seen in 2016) and considers such a level of tariffs unlikely.”
Both Trump and Democrats said they believed the trade deal needed to be changed to accommodate potential plans by Chinese manufacturers like BYD.
Trump put forward several tariff proposals during his campaign, including a call for a tariff or tax of more than 200% on imported vehicles from Mexico. He has also threatened, as he did in his first term, to increase tariffs on European vehicles.
—CNBC's Michael Bloom contributed to this report.
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