Automaker shares fall as Trump threatens 25% tariff on Mexico and Canada

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A carrier trailer transports Toyota cars for delivery while queuing at the border customs control to cross into the U.S., at the Otay border crossing in Tijuana, Mexico May 31, 2019.
Jorge Duenes | REUTERS

DETROIT – Shares of automakers General Motors and Stellantis fell Tuesday morning after President-elect Donald Trump threatened to put 25% tariffs on goods imported from Canada and Mexico into the U.S.

Since the North American Free Trade Agreement went into effect in 1994, the automotive industry has used the countries, particularly Mexico, for lower cost production of vehicles. Nearly every major automaker operating in the U.S. has factories in Mexico, and GM and Stellantis produce full-size pickup trucks there.

Shares of GM and Chrysler parent Stellantis, which has four major plants in the countries, both dropped more than 4% on Tuesday. Shares of Ford Motor, which has less exposure in the countries, were down nearly 2%. Shares of Toyota Motor, Honda Motor and others with production in Mexico also were down at least 1%.

Trump announced he intends to levy a 25% tariff on all U.S. imports from Canada and Mexico using an executive order when he is inaugurated on Jan. 20. He also announced plans to raise tariffs by an additional 10% on all Chinese goods coming into the U.S.

Such tariffs would be more aggressive than what was expected to be Trump’s plan, a renegotiation of the United States-Mexico-Canada Agreement, which he hashed out during his first term to replace the North American Free Trade Agreement. Such a move would end the regional free trade deal.

Trump and Democrats alike said they believe the trade deal needs to be changed to address potential plans for Chinese manufacturers such as BYD.

Trump floated several tariff proposals during his campaign, including calling for a more than 200% duty or tax to be levied on imported vehicles from Mexico. He also has threatened, as he did during his first term in office, to increase tariffs on European vehicles.

This is developing news. Please check back for additional updates.

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