The soon-to-be-inaugurated president, Donald Trump, vowed to quickly fulfill his campaign promises, imposing tariffs on imported commodities from Mexico and Canada on the first day of his presidency. Trump announced a 25% tariff on all goods from Mexico and Canada while threatening a 10% tariff on chinese goods, although he did not specify whether this measure would take effect on the first day of his presidency.

This policy will severely impact the auto industry and may lead to an increase in new car prices for consumers in the usa in the long term. "On January 20th... I will sign all necessary documents to impose a 25% tariff on all goods from Mexico and Canada," Trump wrote on Truth Social, "This tariff will remain in effect until drugs, especially fentanyl, and all illegal immigration stop invading our country."

The auto industry faces a shock.

Free trade among the usa, canada, and mexico has lasted for decades and has profoundly influenced the formation of the north american auto industry. However, the 25% tariff would nearly impact all auto manufacturers, as almost all manufacturers selling cars in the usa have production or supply capabilities from canada or mexico.

$Ford Motor (F.US)$In Tuesday's trade, closing down 2.6%, at $11.10 per share; $General Motors (GM.US)$ The stock price plummeted by 9%, closing at $54.79 per share. $Stellantis NV (STLA.US)$ The stock price fell by 5.7%, reported at $12.61. Analysts pointed out that this decline is directly related to the companies' exposure in the mexican market. General Motors, due to its extensive operations in mexico, will face greater cost pressures. Bernstein analyst Daniel Roeska estimates that tariffs may reduce General Motors' profit margins by 2 to 3 percentage points, while Stellantis and Ford could see reductions of 2 percentage points and 1 to 2 percentage points, respectively.

Ford issued a statement emphasizing, "Ford's commitment to american manufacturing is unparalleled. We produce the most vehicles, employ the most american workers, and export the most vehicles from the usa to other markets." However, general motors and Stellantis did not comment on this.

Global auto stocks are under pressure.

The markets in Asia and Europe were also not spared. $Nissan Motor (7201.JP)$ The stock price dropped by 4.74%. $Honda Motor (7267.JP)$ fell by 3%, $Toyota Motor (7203.JP)$ fell by 3.62%. In europe trading, volkswagen fell by 2.3%, bmw fell by 1.1%. In contrast,$Tesla (TSLA.US)$due to its north america assembly business being located entirely in the usa, it was minimally affected, with the stock price only dropping by 0.1%.

According to estimates from barron's, a 10% tariff could increase new car prices by 4% to 5%, while a 25% tariff might lead to an 8% increase. Price increases will not only reduce demand but may also lead to a decline in sales. Baird analyst luke junk expects that a 25% tariff could result in a decrease of about 1.1 million vehicles in us auto sales.

Policy threats may serve as negotiation leverage.

However, some analysts believe that this threat may just be a negotiation strategy rather than a final decision. Roeska pointed out: "It is technically possible to impose tariffs on china, but imposing tariffs on canada and mexico would contradict the existing united states-mexico-canada agreement (USMCA). Such a large-scale impact seems hard to imagine, it appears more like a current bargaining chip."

Nevertheless, trump can indeed impose tariffs through executive orders under the excuse of national security. This aggressive tariff policy has raised market concerns about a trade war, especially as europe may become the next target.

Hargreaves lansdown analyst matt britzman stated in a report on tuesday: "The elected president's tough stance has intensified fears of a trade war, and investors are increasingly concerned that europe may be his next target."

Editor/Rocky