Stock prices fall dramatically in the auto industry after Trump announces a 25% tariff imposition
In a dramatic twist, the automotive sector has been rocked by fresh tariff announcements from US President Donald Trump, focusing on car imports. On 26 March, Trump declared a 25% levy on cars and automobile components entering the US, effective from 3 April.
Unsurprisingly, this move has sent shockwaves through the industry. Mexico, the leading auto importer to the US, will bear the brunt of these tariffs, followed by South Korea, Japan, Canada, and Germany. Even American car manufacturers are not immune to these changes due to their interconnected production lines.
Justifying his decision, Trump referenced a 2019 investigation by the commerce department that deemed "excessive" imports as a threat to US national security. However, experts criticize this move as a strategic ploy from the Trump administration. By citing national security concerns, Trump can bypass Congress and impose tariffs under Section 232 of the Trade Expansion Act of 1962.
Interestingly, in the past, Trump has also used this act to impose tariffs on countries like Canada, citing reasons such as fentanyl trafficking and illegal immigration. However, according to CNN, just 0.2% of all fentanyl seized last year was found at the Canadian border.
As expected, auto stocks have plummeted in response. Toyota dropped 2.8%, while Hyundai shed 4.3%. European auto stocks have suffered as well, with Mercedes Benz plunging by over 4% and Volkswagen, BMW, and Porsche all seeing declines. American auto manufacturers have started the day lower too.
It remains to be seen how these tariffs will impact US businesses, consumers, and the auto industry. Companies like General Motors, with plants in Mexico and Canada, are particularly concerned. The tariffs could raise new car prices by up to $4,000 to $10,000, according to Anderson Economic Group. Stellantis and Ford also have part of their production line in Mexico or Canada and could be severely affected.
While the long-term goal of the Trump administration is to move manufacturing to American soil, this process is costly and slow. Without clear certainty and permanent policies, companies may be hesitant to invest in the US during this already volatile time.
- The property values of businesses in the automotive industry, particularly those in Mexico and other countries affected by the tariffs, may see a decline due to the economic uncertainty.
- Finance analysts have suggested that the aerospace industry, which relies heavily on international trade, may also feel the impact of these tariffs, as increased costs could lead to reduced exports.
- Politicians from countries affected by the tariffs have expressed concerns about the potential impact on migration, as increased unemployment and economic instability could lead to people seeking work in other countries.
- In the field of general news, experts are closely watching the ongoing war-and-conflicts in some countries to see if they could be exacerbated by the economic instability caused by the tariffs.
- Policymakers and legislators are facing pressure to address this issue, with many calling for policy-and-legislation that would aid industries affected by the tariffs and protect American businesses from unfair competition.
