Auto Plant in Mexico

President Donald Trump announced a 25% tariff rate on all imported vehicles on Wednesday, startling investors. Following this announcement, most auto stocks experienced a decline on Thursday, as various automakers anticipate negative impacts due to higher prices.

The tariffs are set to take effect on April 3, and there remains a possibility for negotiations that could alter the final rate or modify the scope of the tariffs. Nevertheless, investors are reacting quickly, as the future tariffs, if fully implemented, could result in losses amounting to tens of billions of dollars for automakers.

Each year, approximately 16 million cars are sold in the U.S., with around half manufactured in foreign countries. Additionally, nearly all vehicles utilize foreign-made auto parts, which will also face the new tariffs.

In a note on Thursday, JPMorgan analyst Ryan Brinkman referred to the tariffs as “draconian,” prompting him to lower his price targets for companies like General Motors, Ford, and Ferrari. He stated, “We are lowering our price targets for shares of General Motors, Ford, and Ferrari given the increased potential for material earnings risk from draconian auto tariffs that now seem likelier than ever to be imposed as soon as April 3.”

Brinkman now estimates that these new tariffs could impose a burden of $82 billion on the auto industry, a significant increase from his previous estimate of $41 billion.

Major Declines in Auto Stocks

Here are the biggest losers as a result of the Trump auto tariffs, based on Thursday’s trading actions:

General Motors

General Motors’ stock fell about 7% on Thursday, following a 3% drop on Wednesday. The company depends heavily on manufacturing its vehicles in Canada and Mexico.

Relative Winners

While the general expectation is that the Trump tariffs will increase auto prices across the board, some manufacturers are comparatively better positioned, such as Tesla and Rivian, which produce most of their vehicles domestically.

Consequently, stock for both Tesla and Rivian rose approximately 2% on Thursday.