Major automakers saw their share prices tumble Thursday following President Donald Trump's announcement of sweeping 25% tariffs on all imported vehicles and auto parts, a move aimed at bolstering domestic manufacturing but one that threatens to disrupt global supply chains and inflate consumer prices.
Shares of General Motors fell 8.2%, the steepest among U.S. automakers, reflecting its exposure to foreign manufacturing. According to JPMorgan analysts, GM sources about 40% of vehicles sold in the U.S. from plants in Mexico and Canada. Ford shares declined 4.2%, while Stellantis dropped 2.5%. Toyota and Honda, whose U.S.-traded shares were also hit, fell 2.4% and 2.7%, respectively.
The tariffs, set to take effect April 3, apply to "all cars that are not made in the United States," Trump said Wednesday. These measures are designed to “protect American jobs," he added. But critics across the globe, including officials from Canada, Germany, and South Korea, decried the move as protectionist overreach.
In contrast to the broader industry reaction, Tesla shares rose more than 5% on the news, buoyed by investor optimism that the electric carmaker, which builds vehicles in California and Texas, might gain a competitive edge. However, Tesla CEO Elon Musk quickly pushed back on the perception that his company would benefit unconditionally.
"Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant," Musk posted on his social media platform, X. "To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial."
Tesla's vehicles may be assembled domestically, but many of its components-including electronics, suspension systems, and specialty glass-are imported from global suppliers. In a letter to the U.S. Trade Representative, a Tesla spokesperson noted that "certain parts and components are difficult or impossible to source within the United States," despite aggressive efforts to localize production.
Auto parts suppliers also felt the pressure. Shares of Aptiv fell 5.6%, Autoliv dropped 3.7%, and Gentex slipped 1.7%, all reflecting concern over increased input costs and disrupted sourcing strategies.
"There are still a lot of unknowns, but if this remains in place, there will clearly be some pain for the companies to digest," Joseph Spak, an analyst at UBS, wrote in a note to investors.
Trump's tariff push also comes amid slowing U.S. vehicle demand and consumer fatigue over elevated car prices. Analysts warn that price hikes could ripple through the economy and exacerbate inflation, potentially undermining efforts to maintain economic stability.
U.S. allies reacted swiftly. Canadian Prime Minister Mark Carney called the tariffs a "direct attack" on Canadian workers and vowed retaliation. German Economy Minister Robert Habeck urged a "firm response," warning the move puts Europe's automotive sector at risk.
Trump denied that Musk had played any advisory role in shaping the tariff policy. He "didn't advise on the tariffs because he may have a conflict," Trump told reporters. "He never asked me for a favor in business whatsoever."
Meanwhile, the global auto industry braces for fallout. The U.S. imported $474 billion in automotive products in 2023, including $220 billion in passenger cars. Any prolonged disruption could reverberate through plants, logistics hubs, and dealerships worldwide.
