The stock of General Motors (GM) is down 8% after U.S. president-elect Donald Trump threatened to impose blanket 25% tariffs on all imports from neighboring Canada and Mexico.
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Other auto stocks, including Ford Motor Co. (F) and Stellantis (STLA), are also down sharply after Trump took to social media and said that on his first day in office January 20 he will impose 25% tariffs on all imported goods from Mexico and Canada.
Trump said the tariffs are necessary to combat illegal migrants and drug flows across the U.S. border, and that he will use an executive order to implement the tariffs on his first day in office. The tariffs are seen as particularly bad for the U.S. automotive industry, which manufactures many of its vehicles and parts in Canada and Mexico due to the cheaper cost base.
Analysts Raise Alarms
Automotive analysts have been quick to sound the alarm on Trump’s proposed tariffs. By some calculations, the tariffs will raise the cost of a new car in the U.S. by as much as 8% without any adjustments from automotive manufacturers.
Luke Junk, an analyst at Wall Street firm Robert W. Baird, wrote in a note to clients that Trump’s 25% tariff has “placed a bullseye on the U.S. auto industry.” Junk estimates that a 25% tariff on auto imports from Mexico and Canada will reduce U.S. car sales by more than one million units annually.
Despite the current decline in its share price, General Motors stock is up 56% this year.
Is GM Stock a Buy?
The stock of General Motors has a consensus Moderate Buy rating among 18 Wall Street analysts. That rating is based on 10 Buy, six Hold, and two Sell recommendations issued in the last three months. The average GM price target of $56.67 implies 1.80% upside from current levels.
