On Monday, eastern time in the usa, president-elect Trump threatened on social media to impose a comprehensive 25% tariff on all commodities imported from Mexico and Canada, including bulk trade products such as autos.

With this news coming out, the stock prices of the American auto giants suffered a major blow, $General Motors (GM.US)$ with stock prices plummeting 8.99% on Tuesday, $Stellantis NV (STLA.US)$ and closing down 5.68%.$Ford Motor (F.US)$Stock prices fell by 2.63% because a large number of autos produced in Mexico by these companies are exported to the USA, and Trump's tariffs will have a huge impact on this.

American automakers are quite "injured".

Currently, several American auto giants have set up their manufacturing bases in Mexico and transport vehicles from Mexico to the USA for sale. According to data from the Mexican Automotive Industry Association, in the first six months of this year, the top ten auto manufacturers with factories in Mexico produced a total of 1.4 million vehicles, 90% of which were sold across the border to the USA.

Among these American companies with factories in Mexico, general motors is the leading one, followed by ford and Stellantis. It is precisely because of this that these three companies' stock prices were hit the hardest on Tuesday.

According to data from the business analysis company GlobalData, general motors is expected to import over 0.75 million vehicles from Canada or Mexico this year, most of which are produced in Mexico. This includes some of general motors' most popular models, including nearly 0.37 million Chevrolet Silverado or GMC Sierra full-size pickups and nearly 0.39 million mid-size SUVs.

It is worth mentioning that general motors' factory in Mexico also produces two critical new electric vehicles, namely the battery-powered versions of the Equinox and Blazer SUVs. These electric models produced by general motors have already become targets of another anticipated policy by Trump: to end the $7,500 electric vehicle subsidy.

Analyst Daniel Roeska from Bernstein stated in a report: "If the (Trump tariffs) are implemented, it will be disastrous for the US auto industry and the 'Big Three' in Detroit, as these three auto manufacturers import a large number of vehicles from Canada and Mexico. Volkswagen and other european automakers will also be hurt."

Kenneth Smith Ramos, Mexico's former chief negotiator for the US-Mexico-Canada Agreement, stated that this move could harm the interests of the USA and its North American trading partners.

"The USA will be shooting itself in the foot," he stated, adding that this tariff plan would have a "very negative" impact on Mexico's auto industry.

Employment in the USA will be "hurt."

General Motors has 0.125 million employees in North America. If the sales of vehicles manufactured in Mexico decline, it may harm its profits across North America, putting pressure on workers in both the USA and Mexico.

Given that Trump also mentioned drugs and immigration issues in the posts about tariffs, some analysts predict that his threats over tariffs are more of a negotiation strategy, rather than actual policy proposals.

Thomas Ryan, a North American economist at Capital Economics, stated: "Given that the (social media) posts explicitly mentioned the flow of people and drugs across the northern and southern borders, this indicates that this specific tariff threat is more of a negotiation tool rather than a means of increasing revenue."

He added: "This opens the door for Canada and Mexico to present credible plans in the next two months to try to avoid these tariffs."

Mexican President Claudia Sheinbaum has called for dialogue with Trump and warned that the proposed tariffs lack "reason" and will exacerbate inflation, stifling job opportunities in both countries. She also mentioned the possibility of retaliatory tariffs, but considering Mexico's significant trade surplus with the USA, the Mexican economy is still more susceptible to the threat of tariffs.

USA consumers will also be "hurt".

Many economists have already warned that Trump's move to raise tariffs will also impact USA consumers. Although tariffs are paid by companies that export goods directly to the USA, this cost will inevitably be passed on to consumers through higher prices.

"That's how tariffs work. Although the (Trump) administration might want to say that Mexico is paying... ultimately, the consumers will bear it all," said Sudip Suman, managing partner at consulting firm Arrow Electronics Inc.

Tariffs could lead to rising prices for many pickup trucks popular in rural USA—despite the fact that the vast majority of residents in those areas are Trump supporters. Notably, many pickup models like the Toyota Tacoma, Ford Maverick, Stellantis' Ram, and General Motors' Chevrolet Silverado are produced in Mexico.

Sam Fiorani, an auto industry analyst at AutoForecast Solutions, stated that for General Motors, given the higher profit margins on its pickup models, it may be able to absorb part of the tariff costs; but for other manufacturers that sell low-cost pickup models like the Nissan Sentra, it may become increasingly difficult to sustain production under the heavy pressure of tariffs.

Fiorani said, "Someone has to bear these costs, and they will be borne by either manufacturers or consumers... All cars sold in the USA will become more expensive, or automaker profits will decline significantly."

Tariffs may also impact the cost of auto production in the USA, as many auto parts now come from Mexico. Mexico accounts for 43% of the total auto parts imported by the USA, more than any other country.

Francisco Gonzales, head of the national auto industry in Mexico, stated that regional cooperation in North America has lowered costs for customers. He mentioned that auto manufacturers cannot produce all products in one country as it would cause them to lose competitiveness.

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