Trump Tariffs on Mexico and Canada Are a Significant Headwind for Our Europe Auto Supplier Coverage

US President Donald Trump implemented a 25% tariff on all imported goods from Mexico and Canada into the US on March 4, 2025. This is a material headwind for our European auto supplier coverage. Many auto parts suppliers have said that they will pass on the tariff costs to their customers, the automotive original equipment manufacturers, or OEMs, given their already thin margins and lower industry production volumes. Even if this is the case, we see secondary effects affecting their bottom lines and cash flows. We keep our fair value estimates for BorgWarner and Continental unchanged for now, given the uncertainty around the duration or permanency of these tariffs.