DETROIT — The 25% tariffs on imported vehicles to the United States, implemented by President Donald Trump, have begun to take effect. The repercussions of these tariffs are anticipated to unfold over the coming months and potentially years, influencing both investors and the broader automotive sector.
The tariffs target any vehicle not assembled in the U.S., with S&P Global Mobility indicating that such imports made up 46% of the approximate 16 million vehicles sold in the U.S. last year. The White House has also announced plans to impose tariffs on certain auto parts, including engines and transmissions, with these measures expected to take effect by May 3.
Analysts on Wall Street and investors are expressing concerns regarding the tariffs, with some warning that they may severely impact corporate profits and potentially push the automotive industry toward a recession.
“Tariffs maintained at 25% on automotive imports beyond four to six weeks would likely dampen the entire sector as manufacturers contend with considerable impacts on their financials,” noted Bernstein analyst Daniel Roeska in a recent report to investors.
TD Cowen’s Itay Michaeli referred to the tariffs as “close to the worst-case scenario relative to prior expectations,” while Barclays’ Dan Levy remarked, “there are no ‘winners’ here, only those who might fare better.”
Despite acknowledging potential initial “pain” from the tariffs, Trump maintains that these actions will ultimately strengthen American jobs and generate over $100 billion in annual revenue for the U.S.
Automakers have been advocating for exemptions for vehicles and parts compliant with Trump’s United States-Mexico-Canada trade agreement (USMCA), yet no exemptions have been granted for vehicles at this time.
In the coming days, there may be stipulations for auto parts that have yet to be finalized, although analysts caution that auto stocks are likely to experience volatility.
As the consequences of the tariffs continue to evolve, investors must remain vigilant about identifying which companies face the greatest risk, the vehicles affected, and the extent of the potential impact on earnings.
U.S.-built does not mean U.S.-made
No vehicle is fully sourced and manufactured domestically.
Though vehicles may be assembled in the U.S., the numerous components required for production originate from a global supply chain.
For instance, the Ford Motor’s F-150, while assembled in the U.S., has around 2,700 main billable parts—excluding numerous smaller components—sourced from at least 24 different countries, according to engineering consulting firm Caresoft.
The timing and implementation of the tariffs on auto parts will be critical and could provide relief to some automakers, depending on their supply chain configurations.
Parts that meet the USMCA requirements will remain tariff-free until the Secretary of Commerce and Customs and Border Protection determine which non-U.S. content will incur tariffs.
Under USMCA guidelines, automakers may also have a chance to see U.S.-sourced materials impact their tariff rates, according to the White House.
Automakers most impacted
S&P Global Mobility notes that manufacturers such as Volvo, Mazda, Volkswagen and Hyundai Motor (including Genesis and Kia brands) are the most susceptible as more than 60% of their U.S. sales were imported in 2024.
Conversely, Ford, General Motors, Toyota Motor, Honda Motor and Chrysler’s parent company Stellantis are the leading U.S. producers, collectively responsible for 67% of the U.S. passenger light-vehicle output in 2024, per S&P Global Mobility data.
However, Bernstein estimates that 57% of the value contained in U.S.-assembled vehicles is sourced from abroad, indicating that even Ford, the largest U.S. vehicle manufacturer, will be substantially affected by the tariffs.
Among the automakers based in Detroit, Bernstein’s analysis shows that GM will experience the most significant tariff exposure, with over 80% of its revenue originating from North America and a vehicle import rate of 48%, while domestic builds have less than 40% U.S. parts content.
According to Bernstein estimates, GM’s earnings before interest and taxes could plummet by 79% due to the tariffs, alongside an estimated 81% drop in earnings per share and a $4.1 billion reduction in free cash flow.
In comparison, Bernstein predicts Ford may experience a 16.5% decline in EBIT, a 23% decrease in EPS, and a 36% drop in its free cash flow.
Stellantis is projected to be the least affected, with around 40% of its global revenue sourced from the U.S. and 56% local parts content, resulting in approximately $1 billion impact to EBIT, an 8.75% reduction in net income, and roughly $540 million impact to free cash flow.
Without considering the potential tariffs on parts, U.S. electric vehicle leader Tesla, along with startups Rivian Automotive and Lucid Group, finds itself in a more advantageous position, as all their vehicles sold in the U.S. are assembled domestically.
“Tesla stands out as a structural winner: localized production, solid market share, and reduced exposure to trade risks. For others, this scenario leads to a margin adjustment and poses a genuine challenge to near-term earnings,” Roeska added from Bernstein.
U.S. auto sales
In the first quarter, U.S. auto sales exceeded industry expectations, driven by consumer demand for new vehicles ahead of the implementation of tariffs, which are anticipated to trigger higher vehicle prices.
S&P Global Mobility indicated that as manufacturing costs rise for both importing and producing vehicles domestically, consumer prices will also inevitably increase.
The firm predicts U.S. light-vehicle sales could contract to between 14.5 million and 15 million units annually in the following years if the tariffs remain intact, a stark contrast to approximately 16 million vehicles sold in 2024.
Entry-level vehicles are the most vulnerable to potential cuts or price hikes, according to industry analysts. Automakers conventionally produce these models—historically with slim profit margins—in lower-cost countries for export to the U.S.
For instance, GM imported more than 400,000 entry-level crossovers for its Buick and Chevrolet brands tariff-free last year from South Korea. These vehicles serve as a crucial element in the automaker’s strategy for growth in lower-margin segments.
Additional models likely to be affected by tariffs include the Toyota RAV4 and Honda CR-V from Canada, alongside the Ford Maverick, Ford Bronco Sport, and Chevrolet Equinox from Mexico.
Bank of America estimates that the cost of new vehicles—currently averaging around $48,000—could climb by as much as $10,000 if manufacturers fully pass the tariffs onto consumers.
Most automakers have yet to clarify the specific price adjustments they might implement due to the new auto tariffs and associated levies on parts, steel, and aluminum.
“We are continually evaluating all possible scenarios,” remarked Randy Parker, CEO of Hyundai Motor North America, regarding potential price increases. “What I can say to our customers is that, as it stands today, we haven’t raised prices yet, and it’s a great time to consider purchasing a vehicle.”
