Trump’s tariffs could slash automaker profits by 17%

Analysts warn that automakers around the world, including those in the United States, should brace for years of financial pain if incoming President Donald Trump follows through on his promise to introduce new import tariffs.

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Experts from S&P Global say European and U.S. auto companies could see their annual profits slashed by 17% due to possible tariffs on goods shipped to the U.S. from Mexico and Canada. Some brands’ profits may fall by more than 20%.

RELATED: Trump promises 25% tariffs on goods from Canada, Mexico on day one

The most vulnerable automakers include General Motors, Stellantis, Volvo and Jaguar Land Rover, which are at risk of losing more than a fifth of their EBITDA profits, S&P said. Volkswagen and Toyota could lose 10% to 20% of profits, while BMW, Ford, Mercedes and Hyundai-Kia could suffer losses of 10% or less.

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Trump didn’t take office until January, but earlier this week he pledged that one of his first orders of business would be to impose 25% tariffs on any imports from the U.S.’s neighbors, even as the U.S., Canada and Mexico have already struck deals with North Korea. Signing of the US Free Trade Agreement (NAFTA). Trump said the tariffs were in response to the volume of drugs and immigrants crossing the border and, once implemented, would remain in effect until Mexico and Canada crack down on border violations.

If Trump sticks to his guns, that would be bad news for several automakers, including General Motors, Ford and Stellantis, which all build cars for American consumption outside the United States. The same goes for European brands such as BMW and Volkswagen, and S&P also predicts that cars imported from Europe into the United States could (in a worst-case scenario) face 20% tariffs.

All of these brands have factories in the United States, and S&P expects Ford, General Motors and Stellantis to theoretically move all of their overseas production to underutilized U.S. plants. Stellantis’ utilization rate is below 50%, while GM and Ford have as much as 1 million units of spare capacity, the report said.

Volkswagen, BMW and Mercedes will find it more difficult to produce “onshore” in Mexico, but even those that can will need to spend significant amounts of money to expand and retrofit existing U.S. plants. There are no quick or cheap solutions.

Some automakers, such as Jaguar, Audi and Porsche, don’t have a U.S. base to help ease some of the pain. S&P believes VW could give Audi access to its U.S. production facilities, but Jaguar Land Rover has no partner to help. Analysts predict that automakers unable to evade tariffs may pass on some, but not all, of the costs to customers.

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