General Motors shares slumped lower in early Thursday trading, leading a raft of declines for U.S. automakers and their suppliers, following a fresh round of tariffs that could threaten an already struggling sector heading into the coming months and beyond.
President Donald Trump unveiled his latest tariff plan last night in Washington, which includes a 25% levy on all imported cars to begin on April 3. A similar duty on the auto parts supply chain will be imposed the following month, Trump said, giving companies operating within the USMCA trade pact time to verify U.S. made components.
“President Trump’s decision to implement tariffs on imports of automobiles and automobile parts will protect and strengthen the U.S. automotive sector,” the White House said in a fact sheet published alongside the announcement, adding that action is designed to “end unfair trade practices that jeopardize U.S. national security.”
President Donald Trump said the latest round of auto sector tariffs, unveiled last night in Washington, will be “permanent”.
The planned levies will have a major impact on the domestic auto sector, which sold around 8 million foreign-made cars last year, almost half of the 16 million overall vehicles purchased. Sector imports were pegged at $474 billion last year.
General Motors (GM) , could face that biggest hit from Trump’s tariff plan, given that only around a third of its cars are built from domestic parts, even if more than half of them are built and sold in the U.S.
CEO Mary Barra told investors in late January that the carmaker had “multiple playbooks that we have been working on to make sure that we can respond or even anticipate” new tariff challenges.
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The bulk of Ford (F) cars solid in the U.S., around 82%, are made domestically, but, much like GM, only around a third of their parts are sourced from American suppliers.
Group CEO Jim Farley told investors last month that while a “few weeks of tariffs are manageable”, protracted levies would have a “huge impact on our industry with billions of dollars of industry profits wiped out and adverse effect on U.S. jobs, as well as the entire value system in our industry.”
JPMorgan analyst Ryan Brinkman, in a note published Thursday, said the current tariff proposal could cost GM around $14 billion, nearly all of its 2024 earnings. Ford’s impact, the analyst estimated, would be around $6 billion.
“We estimate GM imports ~$56 billion of vehicles annually from Mexico and Canada, which after adjusting for content originating in the U.S. may amount to ~$38 billion—subject to a ~$10 billion tariff under a 25% rate,” Brinkman and his team said. “For parts, we estimate GM’s share of the ~$92 billion imported by the industry may be ~$4 billion, implying a total tariff exposure of ~$14 billion before coping mechanisms.”
“We believe GM’s higher reliance on imports increases its vulnerability to proposed tariffs and creates more downside risk relative to peers,” Brinkman added.
Brinkman lowered his price target on GM by $11, taking it to $53 per share, and cut his target on Ford by $2 to $11 per share, while maintaining an ‘overweight’ rating for both names.
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Wedbush analyst Dan Ives described the new tariff proposals as a “hurricane-like headwind to foreign (and many US) automakers” that could add between $5,000 and $10,000 to the cost of a new vehicle.
“We continue to believe this is some form of negotiation and these tariffs could change by the week although this initial 25% tariff on autos from outside the US is almost an untenable head scratching number for the US consumer,” Ives said.
GM shares were last marked 6.6% lower in premarket trading to indicate an opening bell price of $47.60 each. Ford shares, meanwhile, were marked 0.8% lower at $10.22 each.
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