Auto Stocks Slide on Trump’s 25% Tariffs

US and European auto stocks headed mostly lower on Thursday after US President Donald Trump announced blanket 25% tariffs on imports of foreign-made cars. He said Wednesday that the tariffs will be “permanent,” apply to all countries equally, and apply to both final vehicle imports and parts.

While the effects on individual automakers and models will vary significantly, the tariffs could broadly impact the affordability of new cars. “Tariffs will likely raise auto prices for consumers as automakers pass along increased costs,” explains Morningstar strategist Seth Goldstein.

Among US automakers, General Motors GM stock took the hardest hit on Thursday, losing more than 6%, while Ford F slid roughly 2% and US-listed shares of Stellantis STLA edged down just over 1%. The exception was Tesla TSLA. While that firm is exposed to tariffs on parts and materials, it’s seen as avoiding the worst of the measures thanks to its US production base. The stock extended a recent bounce, gaining nearly 6%.

While Trump’s stated intent behind the tariffs is to bring auto production to the United States, the levies will still be felt by US automakers, thanks to the complex cross-border web of material sourcing, parts, and plants.

Ford imports the Lincoln Nautilus from China, contributing 1.8% of the firm’s sales volumes, according to Morningstar equity analyst Rella Suskin. Meanwhile, GM imports the Buick Envision from China and the Buick Encore GX, Buick Envista, Chevrolet Trax, and Trailblazer from South Korea. Suskin says these models combined contribute a “mid-teens” percentage to GM’s US sales volume. She believes that “Ford is the most protected from tariff impacts.”

Goldstein explains that Tesla differs from other major automakers: “Tesla should see less impact from this specific announcement, as the company domestically manufactures nearly all its autos sold in the US.” However, he continues, “Tesla is not immune to tariffs. The company does source auto parts (including raw materials, such as steel and aluminum) from countries subject to tariffs, which will raise the cost to produce its vehicles.”

In European trading, Mercedes-Benz MBG fell the most among German automotive stocks, with shares falling by more than 4% before rebounding to trade down 3%. Volkswagen VOW3 traded 1.3% lower, BMW BMW was down 2.4%, and Porsche PAH3 was down 2.7%. France’s Renault RN0, which has minimal exposure to the US market, bucked the trend and traded slightly higher.

EU Set to Impose Reciprocal Tariffs

The European Union is likely to impose reciprocal tariffs. EU Commission President Ursula von der Leyen says it will assess this announcement and other measures the US is envisaging in the next few days. “As I have said before, tariffs are taxes—bad for businesses, worse for consumers equally in the US and the European Union,” read her statement following Trump’s announcement.

Tariffs Threaten Automaker Valuations

“We expect a negative 20%-30% impact on our fair value estimates on a permanent tariff of this size,” says Suskin. “For now, though, we leave our valuations unchanged as we assess the likelihood of tariff permanence and the impact of likely reciprocal actions by the EU. There is enough margin of safety at current prices for investors, as shares trade at deep discounts to our valuations.”

Suskin explains that most European automakers have been increasing their exposure to the US to offset muted growth in Europe and a significant decline in sales from China. “With new car prices likely to increase materially in the US, demand is expected to be dampened, negatively affecting the automakers’ growth-seeking geographic diversification strategy,” she says.

European Exposure to US Sales Varies

BMW and Mercedes generate around a fourth of their sales from the US, according to Suskin. While about 50% of their US-sold vehicles are domestically assembled, most of the engines and transmissions are imported from Europe. This makes them noncompliant on “rules of origin,” according to the United States-Mexico-Canada Agreement.

“Stellantis earns just under 50% of its revenue from the US, giving it greater exposure to the likely more restrained market demand going forward. We estimate around 60% of its US-sold vehicles are assembled domestically, with the remainder mostly manufactured in Mexico. Stellantis’ USMCA compliance means only the parts of the vehicles manufactured across the border will be levied,” she points out.

Suskin continues: “The US only contributes a mid-teens percentage to the Volkswagen brand’s sales volumes currently. Its intention to meaningfully expand in the US is supported by construction, already underway, of a new manufacturing facility for its US-centric Scout brand expected to be launched in 2027. Volkswagen, in contrast to Mercedes and BMW, sources most of its engines and transmissions from within North America. Audi, Porsche, and Ferrari import 100% of their cars into the US. Renault has no sales exposure to the US.”