Auto Stocks Hit Hard as Investors React to Trump’s New Tariffs

Global automakers saw their stocks plunge on Thursday following President Trump’s announcement of a 25% tariff on imported cars and parts, set to take effect next week.

Shares in major U.S. carmakers, particularly those that rely on imports from Mexico and Canada, were hit hard. General Motors, which sources many of its vehicles from Mexico, saw its stock drop over 7%. Ford, less reliant on imports, experienced a smaller dip of about 0.5%. The S&P 500 index fell by 0.4%, continuing its decline from the previous day.

Tesla, which manufactures all of its vehicles in the U.S., saw a slight increase in its stock by 1%. The company is expected to feel less impact from the tariffs compared to other automakers. Trump clarified that Elon Musk, Tesla’s CEO, had not influenced his decision on the tariffs.

Foreign automakers faced the most severe declines. Shares in German car giants Volkswagen, Mercedes-Benz, and BMW dropped between 2% and 4%. Stellantis, the parent company of Chrysler, Fiat, and Peugeot, saw its stock fall by nearly 5%. In Japan, Toyota, Honda, and Nissan each lost about 2% in Tokyo trading. South Korean brands Hyundai and Kia experienced even steeper losses, with their stocks down 3% to 5%.

The impact was also felt by Tata Motors, which owns Jaguar Land Rover. Its stock slumped nearly 6% as it imports all of its vehicles to the U.S. Similarly, Porsche’s shares fell 4%.

The U.S. imports nearly half of the cars sold within its borders, as well as a significant portion of the parts used in vehicles manufactured domestically. Foreign carmakers, particularly from Germany, Japan, and South Korea, rely heavily on the U.S. market. For instance, one-third of Porsche’s sales and one-sixth of BMW’s come from the U.S. Additionally, German companies export $8 billion worth of car parts to the U.S. annually.

In response to the tariffs, analysts have expressed concerns that affected countries may struggle to redirect these exports to other markets. BMW, already bracing for financial fallout, warned that trade tensions could cost the company $1 billion this year.

The turmoil in the auto sector contributed to losses in major global stock indexes. Germany’s DAX dropped nearly 1%, South Korea’s KOSPI fell 1.4%, and Japan’s Nikkei 225 saw a decrease of 0.6%.

Amid these market uncertainties, investors sought safer assets, sending the price of gold soaring by more than 1%, reaching over $3,000 per ounce. Goldman Sachs raised its forecast for gold, expecting it to climb to $3,300 by the end of the year.

Meanwhile, U.S. Treasury yields slightly increased, as traders anticipated the inflationary effects of the tariffs, potentially raising the cost of imported cars by thousands of dollars.

Trump stated on Wednesday that he expected the tariffs to be permanent. However, many analysts believe the economic consequences could lead to a rollback of the tariffs. “The widespread damage they will cause across industries, along with inflationary effects, makes it unlikely this new tariff regime will last,” analysts at Bernstein wrote.

Despite these concerns, the administration’s aggressive trade policies, which also target Chinese, Canadian, and Mexican goods, suggest that a recession may be on the horizon. Trump’s advisers have argued that any short-term economic pain would be worth the long-term benefits. However, analysts remain cautious, noting that the economic impact of such policies could be more prolonged than expected.