Automotive stocks fall on Trump’s Mexico tariff over immigration

Automaker stock prices fell on Friday after President Donald Trump announced he would slap tariffs on imports from Mexico, where auto manufacturers have plants and suppliers.

Trump announced he will impose a tariff of 5 percent on goods imported from Mexico starting June 10 until the nation halts its citizens, along with migrants and refugees from Central America, from crossing into the United States illegally. The tariffs would then escalate to 25 percent in the coming months.

BMW, Daimler and Volkswagen, which have plants in Mexico to take advantage of lower labor costs and U.S. trade deals with its southern neighbor, were down by as much as 2.9 percent by 0800 GMT.

GM stock fell 5.5% in premarket trading. Ford lost 4% and Fiat Chrysler %5.

Shares in Asian auto makers dropped overnight.

Stock futures overall on U.S. markets were down on Friday.

“Automakers may indeed see large financial impact and uncertainty from the tariffs, as all major OEMs import a considerable portion of the vehicles they sell in the US from Mexico,” Deutsche Bank said.

Deutsche Bank estimated that even a few months of tariffs will cost automakers — and in turn, consumers — billions, and it said that truck-crazy Americans may be dismayed to learn how many full-size pickup trucks and parts come from south of the border. It noted, for example, that 41% of GM Silverado trucks sold in the U.S. are made in Mexico.

“The suddenly renewed potential for tariffs on goods from Mexico revives a risk many believed was largely behind us,” Citi Research said. “This new uncertainty is a clear negative for auto stocks and we expect pressure pending further clarity as to how this will play out.”

Trump said he would hit goods coming from Mexico with a 5% tariff and would hike that levy each month until it hits 25% on Oct. 1, unless Mexico takes immediate action against illegal immigration across the U.S. border.

A spokesman for VW subsidiary Audi said the company was watching developments very closely but it was too early to speculate on outcomes.

A note by German car analyst Arndt Ellinghorst described carmakers as exposed, noting BMW’s new plant at San Luis Potosi, Mexico, represented nearly 20% of its production for North America.

An auto industry source said the situation was puzzling in that the migration issues belonged to the political stage and came despite an update to the North American Free Trade Agreement (NAFTA) in the making for this summer.

It also came as the EU and the United States are working to avoid an escalation in trade conflicts.

Commerzbank strategist Ulrich Leuchtmann said: “The U.S. trade policy has taken a qualitatively different turn. Using tariffs as a tool for non-economic goals is something which brings a new quality to proceedings.”