Investing.com-- The U.S. auto sector faces a major cost surge as President Donald Trump’s latest tariffs on Canada, Mexico, and China threaten to upend supply chains and drive up vehicle prices, analysts at J.P. Morgan and Bernstein said in separate notes.
The new tariffs impose a 25% duty on imports from Canada and Mexico and 10% on goods from China. With around 22% of new cars sold in the U.S. coming from its North American neighbors, the move could add up to $40 billion in additional annual costs for the industry, according to Bernstein analysts.
Japanese automakers like Nissan (OTC:NSANY) Motor (TYO:7201), Mazda Motor (TYO:7261), and Honda Motor Co (NYSE:HMC), which rely heavily on imports from Mexico and Canada for U.S. sales, are particularly vulnerable. J.P. Morgan analysts noted that a 25% tariff could significantly dent profits for these companies, with Mazda and Nissan seeing the highest risk.
For U.S. manufacturers, the impact is equally severe. Bernstein estimates that unchanged trade flows would result in a daily cost headwind of $110 million, with vehicles made in the U.S. seeing an added cost of up to $1,200 per unit. Those imported from Canada and Mexico could see price hikes of up to $8,000 per vehicle, a 20% increase.
To counter the hit, automakers are expected to raise prices, which could lead to declining sales in 2025. If left unmitigated, the tariffs could wipe out earnings for the big three U.S. automakers, Bernstein analysts wrote, referring to General Motors (NYSE:GM), Ford Motor Company (NYSE:F), and Stellantis (NYSE:STLA).
J.P. Morgan suggests that Toyota Motor (NYSE:TM), with its high U.S. production ratio, could be less affected, while Subaru (OTC:FUJHY) Corp (TYO:7270) and Mitsubishi Motors (TYO:7211), which rely primarily on Japanese imports, may avoid the worst of the fallout unless Japan is included in future tariff hikes.
Despite attempts to mitigate the impact by shifting production and stockpiling parts, analysts warn that the long-term uncertainty around the tariffs could discourage investment in U.S. manufacturing.
“If tariffs stay in place, we would expect significant lower earnings for the U.S. automotive industry,” Bernstein analysts said.
With Canada and Mexico already planning retaliatory tariffs, the auto industry now faces growing pressure from both costs and potential trade escalation, setting the stage for a turbulent year ahead, they added.