U.S. President Donald Trump’s recent levies could eradicate the profits of “Big Three” automakers General Motors, Ford and Stellantis, according to Barclays.
On Tuesday, the president’s 25% tariffs on goods imported from Canada and Mexico took effect, along with an additional 10% tariff on goods from China. All three countries have since said they’ll impose retaliatory tariffs.
“While it’s generally understood that a blanket 25% tariff on any vehicles or content from Mexico or Canada could be disruptive, it may be underappreciated how disruptive this could be,” analyst Dan Levy wrote in a Tuesday note. “In short, without any adjustment from OEMs (i.e. no price increase, no adjustment in production plans), we estimate it could wipe out effectively all profits for the D3 OEMs.”
Shares of GM, Ford and Stellantis were each solidly in the red on Tuesday, with GM falling nearly 4%, Ford dropping more than 2%, and Stellantis declining more than 4%. Those moves put their year-to-date losses at more than 14%, more than 7% and more than 9%, respectively.
“We believe it’s critical to be mindful of further volatility ahead, with the tariff/trade overhang likely to remain for the time being until there is more certainty on the end outcome,” the analyst continued. “That said, to the extent significant incremental weakness emerges in the stocks, we see buying opportunities.”
Among the three names, Levy said that GM and Stellantis would be most impacted by the tariffs, given that they rely “significantly” on both Canada and Mexico for their U.S. vehicle sales. He noted that Canada and Mexico make up at least 35% of the companies’ North American production mix, which includes production of their “highly profitable” trucks.
While the analyst said that Ford is “less impacted” due to its “far less” reliance on Mexico for its vehicles because its high-profit vehicles are produced in the U.S., Levy said the automaker still faces risk related to parts from Mexico and Canada.
To be sure, Levy estimated that for a vehicle with half of its parts content from Mexico and Canada, a 25% tariff could amount to about $2,500 to $3,500 of higher cost.
“Given the potential for significant disruption ahead if the tariffs stick, we believe it’s a reminder as to why tariffs of this magnitude are unlikely to stick,” he also said.
