President Donald Trump has announced new tariffs on foreign automakers, causing stocks to fall on Thursday. The Dow Jones Industrial Average dropped 155.09 points, or 0.37%, while shares of General Motors and Ford Motor Company declined more than 7% and nearly 4%, respectively. Tesla, however, added 0.4% due to its domestic production.
Trump asserted that these retaliatory tariffs will be permanent throughout his second term, but mentioned they would be “very lenient” and aimed at facilitating a deal with ByteDance’s TikTok. He also hinted at imposing “far larger” duties on the European Union and Canada if they cooperate to combat the levies. “I think it’s just the almost scattershot way that trade policies are being implemented that maybe has investors on edge,” said Sameer Samana, Wells Fargo Investment Institute senior global market strategist.
“If in the next couple of weeks we have a trade and tariff framework in place, companies and consumers can start to make decisions again with some clarity.”
The major indexes are clinging to marginal gains this week, with the S&P 500 ticking up 0.5%, the Nasdaq gaining 0.1%, and the Dow adding around 0.8%. Former Ford CEO Mark Fields believes the tariffs will drive up the cost of vehicles across the board. “The cost of vehicles will go up.
Tariffs impact auto industry stocks
It’s just math. The bottom line is there is absolutely no vehicle that won’t be impacted by tariffs,” Fields said in a phone interview.
Bank of America estimates that a 25% tariff on all imported auto parts would raise the cost of US-assembled vehicles by about $26 billion, roughly adding $3,285 per vehicle on average. Goldman Sachs predicts that the cost of foreign-made cars will also rise due to tariffs. Fields contends that it’s unrealistic to expect auto CEOs not to raise prices.
“It’s very intimidating when the president of the United States says, ‘Just suck up the costs and let it hurt your bottom line,'” said Fields. The White House argues that auto tariffs will boost US auto production and create jobs, but if auto tariffs dampen car demand significantly, factories may need to slow or halt production. US suppliers would also need to reconsider their supply chains if assembly plants in Mexico and Canada shut down due to tariffs.
Despite the challenges, UBS advises investors to stay invested in stocks. Mark Haefele, chief investment officer for UBS Global Wealth Management, suggested that investors maintain well-diversified portfolios but remain ready to buy stocks opportunistically.
