A trailer carries Toyota cars for delivery as they wait in line at customs checkpoints to enter the U.S., at the Otay border crossing in Tijuana, Mexico, May 31, 2019.
Jorge Duenes | REUTERS
DETROIT – Automaker stocks General engines And Stellantis fell Tuesday morning after President-elect Donald Trump threatened to impose 25% tariffs on goods imported into the U.S. from Canada and Mexico
Such tariffs would have a major impact on the global auto industry, which the countries, especially Mexico, have used for cheaper vehicle production since the North American Free Trade Agreement took effect in 1994.
UBS reports that the auto industry is responsible for 26% of imports from Mexico to the US, including vehicles and parts, and 12% from Canada.
Nearly every major automaker operating in the U.S. has factories in Mexico, but GM and Stellantis produce highly profitable full-size pickup trucks there.
Shares of GM, which has five major assembly plants in countries that Barclays estimates will produce 1 million vehicles this year, fell more than 8% in afternoon trading Tuesday.
Shares of GM, Ford and Stellantis.
Chrysler parent Stellantis, which has four major factories in the countries, fell more than 5%. Shares of Ford engine, which has less exposure in the countries, fell by 2%. Shares of Toyota engine, Honda engine and others with production in Mexico also fell at least 1%.
Trump announced he plans to impose a 25% tariff on all U.S. imports from Canada and Mexico when he is inaugurated on January 20. He also announced plans to raise tariffs by another 10% on all Chinese goods entering the country. US
Such tariffs would be more aggressive than what was expected to be Trump's plan, a renegotiation of the United States-Mexico-Canada Agreement, which he pushed through 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 Tuesday on the possible tariffs. The American Automotive Policy Council, a lobbying group for the two automakers and Ford, did not immediately respond for comment.
Wall Street analysts viewed Trump's announced tariff plans as a shot across the bow for countries to influence any upcoming negotiations.
“Our view is that the threat of tariffs is the tool Trump would use to extract from other countries the economic and political outcomes he deems best for America,” Carlos Capistran of BofA Securities said in a note Tuesday. “We expect Canada and Mexico to demonstrate a willingness to negotiate the above issues to avoid tariffs.”
Barclays' Dan Levy agreed in an investor note on Monday evening: 'We are looking [the] announcement as largely a negotiating tactic (as seen in 2016), and considers such a magnitude of tariffs unlikely.
Both Trump and Democrats said they believe the trade deal should be changed to address possible plans for Chinese manufacturers such as BYD.
Trump has floated several tariff proposals during his campaign, including calling for more than 200% tariffs or taxes on vehicles imported from Mexico. He has also threatened, as he did during his first term, to increase tariffs on European vehicles.
– CNBCs Michael Bloom contributed to this report.