U.S. President Donald Trump has been vocal about his love for tariffs. “To me, the most beautiful word in the dictionary is tariff, and it’s my favorite word,” Trump said in 2024. Since his inauguration on Jan. 20. 2025, Trump has wasted no time backing up that sentiment, repeatedly dropping trade threats and tariff bombshells.

The United States implemented a 25% tariff on foreign auto imports on April 3. Yesterday, Trump also announced sweeping reciprocal tariffs on multiple countries, sending shockwaves across the global economy. He announced a 10% baseline tariff on imports across the board and steeper rates for select nations. The White House exempted Canada and Mexico from the baseline tariff rate. However, Canada faces steep levies on steel, aluminum and vehicles.

In response, Canada has fired back with its own set of tariffs, setting the stage for a costly standoff. Canadian politician Mark Carney announced a 25% tariff on American-made vehicles that do not comply with the U.S.-Mexico-Canada Agreement. The tariffs do not extend to auto parts or vehicles with significant Mexican content.

Nearly 90% of Canadian-made vehicles are exported to the United States, while American factories rely on Canadian components for assembly. The retaliatory tariffs will not only disrupt trade but also deepen the financial strain on automakers.

Auto Biggies Feel The Heat

Auto stocks were hit hard yesterday. Ford (F Quick QuoteF - Free Report) shares dropped nearly 6%, while General Motors (GM Quick QuoteGM - Free Report) and Stellantis (STLA Quick QuoteSTLA - Free Report) suffered declines of 4.3% and 9.4%, respectively. Automakers are scrambling to navigate these new hurdles, and consumers and investors are bracing for the fallout.

For instance, Stellantis has already announced a temporary shutdown of its Windsor, Ontario, plant due to tariff uncertainty. It will shut down the plant for two weeks beginning Monday. The move will affect nearly 900 workers across the affected sites. The company will also suspend operations at its Jeep plant in Toluca, Mexico, that produces the entry-level Compass. Stellantis is anyway facing a particularly tough road. With high dealer inventories already posing a challenge, the additional burden of tariffs is forcing the company to scale back production.

Ford and General Motors are also reevaluating their strategies to mitigate financial damage. Ford has slashed prices in an attempt to maintain sales momentum, while General Motors is ramping up U.S. pickup truck production to make up for potential losses from Canadian plants. GM’s Fort Wayne, IN plant is adding 250 jobs and transitioning 200 temporary workers to full-time roles.

Investors and analysts are bracing for weaker results in the coming quarters as companies might struggle to maintain sales and margins. So far, Ford and GM have not yet factored in the latest tariffs in their 2025 guidance, meaning further downward revisions could be in the cards.

While Ford carries a Zacks Rank #5 (Strong Sell), GM and STLA are #3 Ranked (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Final Thoughts

North America’s auto industry has long thrived on an integrated supply chain but Trump’s aggressive trade policies are testing those ties. The tariffs are set to raise costs, disrupt production and strain relations between key trade partners. For consumers, this likely means higher vehicle prices. For automakers, weaker sales may impact their bottom line. For workers, job security might become uncertain. And for investors, the volatility is far from over. With little sign of a resolution in sight, the trade war’s impact on the auto industry is just beginning.