GM and Ford shares dip on Trump's tariff threats to China, Canada, Mexico

On Monday, shares of General Motors (NYSE:GM ) and Ford (NYSE:NYSE:F ) experienced declines of 4% and approximately 2% respectively, following President-elect Donald Trump's announcement of potential new tariffs on imports from the United States' main trading partners, which include China, Canada, and Mexico. The automotive giants are particularly vulnerable to these proposed tariffs due to their manufacturing operations in Canada and Mexico and the import of vehicles to the U.S. from China.

Trump, who is set to take office on January 20, has declared his intention to impose a 25% tariff on all products entering the U.S. from Canada and Mexico until these nations address issues related to drug trafficking and illegal immigration. This tariff initiative seems to be in conflict with the U.S.-Mexico-Canada Agreement (USMCA), which promotes duty-free trade between the member countries and was enacted in 2020.

In addition to the tariffs aimed at Canada and Mexico, Trump has also proposed an extra 10% tariff on Chinese imports, which would add to any existing tariffs. This move is part of his broader economic agenda to prioritize America's interests, which he emphasized during his campaign leading up to the election on November 5. Trump's tariff strategy has historically aimed to curb China's most-favored-nation trading status and impose significant tariffs on Chinese goods.

The ramifications of these tariffs could extend beyond North American borders, potentially affecting Asian auto and electronics manufacturers that utilize Mexico as a gateway for low-cost production into the U.S. market. Trump's tariff threats have already had an impact on currency markets, with the U.S. dollar strengthening against the Canadian dollar and the Mexican peso. Asian and European stock markets also saw declines, while S&P 500 futures remained relatively stable.

As Trump's inauguration approaches, the proposed tariffs have sparked concerns among economists, who warn that such measures could lead to higher inflation, disrupt U.S.-China trade, provoke retaliation, and force a reorganization of global supply chains, potentially echoing the high tariff levels of the 1930s.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing.com