Potential tariffs on car parts and vehicles could negatively impact U.S. automakers

From Investing.com: 2024-11-30 04:30:00

The incoming Trump administration has not indicated if it will raise tariffs on automotive parts and vehicles, but analysts at Bernstein outline two scenarios. Doubling tariffs from 2.5% to 5% could be manageable, but changing the USMCA agreement would present significant challenges, especially for the big three U.S. automakers.

The U.S. light vehicle industry imports over 50% of its value, with annual sales totaling 16 million units and $700B to $750B in market value. More than half of these imports come from countries with free trade agreements, such as Mexico, Canada, and South Korea.

A general tariff increase of 2.5% on automotive imports could decrease U.S. margins by around 40 basis points. Doubling tariffs to 5% would add a burden of approximately $2.6 billion or 0.4% of the U.S. total market value.

Ending the USMCA agreement would negatively impact Detroit automakers like General Motors, Stellantis, and Ford. GM, with 29% of U.S. sales coming from Mexico and Canada, would be particularly vulnerable to such a change.

Stellantis, with 38% of U.S. sales from Mexico and Canada, and Ford, with 74% of U.S. sales in the U.S., would also be affected. Tariffs on part imports would lead to cost inflation for domestic vehicle production.



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