Ford, GM, Stellantis Profits At Risk Due To Trump's Tariffs, Says Barclays. 'Tariffs Of This Magnitude Are Unlikely To Stick' - Ford Motor (NYSE:F), General Motors (NYSE:GM)

Barclays issued a warning that the tariffs recently imposed by U.S. President Donald Trump could potentially eliminate the profits of Detroit’s “Big Three” automakers – General Motors GM, Ford F, and Stellantis NV STLA.

What Happened: President Trump imposed 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on imports from China on Tuesday. All these countries have announced retaliatory tariffs in response. Barclays analyst Dan Levy cautioned in a note, “Without any adjustment from OEMs (i.e. no price increase, no adjustment in production plans), we estimate it could wipe out effectively all profits for the D3 OEMs,” reported CNBC on Tuesday.

Levy noted that GM and Stellantis would be impacted the most by the tariffs because they heavily depend on Canada and Mexico for U.S. vehicle sales. Ford, while less affected due to its lower reliance on Mexico, is still vulnerable to risks related to components obtained from both Mexico and Canada. Notably, Elon Musk‘s Tesla Inc. TSLA remains shielded from the tariffs after abandoning its Mexico factory plans.

The analyst estimated that a 25% tariff could increase the cost of a vehicle by $2,500 to $3,500 if even 50% of its parts come from Mexico and Canada. He concluded, “Given the potential for significant disruption ahead if the tariffs stick, we believe it’s a reminder as to why tariffs of this magnitude are unlikely to stick.”

Why It Matters: The automotive sector is expected to be among the industries most affected by Trump’s tariffs and the ‘Detroit Three’ usually derive the majority of their profits from North America. According to Anderson Economic Group, tariffs could increase the cost of manufacturing an electric vehicle by $12,000. Meanwhile, as per a Bloomberg report, Stellantis has expressed concern to its US dealers that the tariffs imposed on imports from Canada and Mexico could put its Jeep, Ram, Chrysler, and Dodge brands at a competitive disadvantage against their European and Asian competitors.

Nevertheless, the domestic carmakers are hopeful of some exemptions under the parts-sourcing rules under The United States-Mexico-Canada Agreement (USMCA). On Tuesday, Commerce Secretary Howard Lutnick indicated that Trump was contemplating providing relief for goods that meet USMCA norms.

The shares of General Motors dropped 4.56%, while those of Stellantis and Ford dropped 4.38% and 2.88%, respectively, on Tuesday, as per Benzinga Pro.