GM and Ford Stocks Plummet Amid Trump's Tariff Threats to China, Canada, and Mexico
On Monday, General Motors (NYSE:GM) and Ford (NYSE:F) shares fell by 4% and approximately 2%, respectively. This decline occurred following the announcement of potential new tariffs on imports from the U.S.'s main trading partners—China, Canada, and Mexico—by President-elect Donald Trump. The automotive giants are particularly vulnerable to these proposed tariffs due to their production operations in Canada and Mexico, as well as vehicle imports from China to the U.S.
Trump, who will take office on January 20, stated his intention to impose a 25% tariff on all products entering the U.S. from Canada and Mexico until the countries address issues related to drug trafficking and illegal immigration. This tariff initiative seems to contradict the United States-Mexico-Canada Agreement (USMCA), which promotes duty-free trade among member countries and took effect in 2020.
In addition to tariffs on Canada and Mexico, Trump also proposed a 10% additional tax on imports from China, on top of existing tariffs. This move is part of a broader economic agenda to prioritize American interests, which he emphasized during the campaign leading up to the November 5 election. Trump's tariff strategy aims to historically restrict China's most favored nation trade status and impose significant tariffs on Chinese goods.
The effects of these tariffs could extend beyond North American borders and potentially impact Asian automobile and electronics manufacturers that use Mexico as a low-cost production gateway to the U.S. market. Trump's tariff threats have already influenced currency markets, strengthening the U.S. dollar against the Canadian dollar and Mexican peso. While Asian and European markets experienced declines, S&P 500 futures remained relatively stable.
As Trump's inauguration approaches, the proposed tariffs have raised concerns among economists. They warn that such measures could lead to higher inflation, disrupt U.S.-China trade, provoke retaliation, and force a restructuring of global supply chains. This situation potentially evokes memories of the high tariff levels of the 1930s.