Global auto stocks fall as Trump tariffs spark trade war concerns

Shares of auto giants fell sharply on Monday, but were off their intraday lows after President Donald Trump said he is pausing his new 25% tariff on goods imported from Mexico until March 1.

Trump signed executive orders on Saturday to implement 25% tariffs on Mexican and most Canadian goods, while imposing a 10% duty on Canadian energy products and additional 10% on Chinese goods, which are set to take effect from Tuesday.

The deferment for Mexico followed the country’s president agreeing to immediately send 10,000 soldiers to the U.S. border to prevent drug trafficking from Mexico.

In the U.S., General Motors was 2% lower as of 11:30 a.m. ET, while Ford was down less than 1%. Shares of Tesla were off roughly 5%. U.S.-listed shares of Chrysler parent Stellantis were down about 3%.

In Europe, shares of French car parts supplier Valeo were off 7%. Germany’s Volkswagen also slipped nearly 5%.

U.S.-listed shares of Japanese auto giants Toyota Motor and Honda Motor were down 2% and 4%, respectively. Tokyo-listed shares of Mazda were off about 8%, while Nissan Motor’s stock was off 6%

The U.S. president warned Americans could feel “some pain” when the measures come into force, but said the tariffs were necessary “because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.”

Canada and Mexico have hit back, threatening to impose retaliatory measures that included tariffs.

Shares of global automakers plunged as investors fretted over the impact of a potential trade war.

Analysts expect Trump’s tariffs to have a profound impact on the global automotive industry, citing a heavy reliance on manufacturing operations across North America, particularly in Mexico, and complex supply chains.

“As it relates to Autos stocks, we do not see any absolute winners in a NA trade war, and we expect Auto Stocks broadly to struggle,” Wolfe Research analyst Emmanuel Rosner said Monday in an investor note.

Trump has suggested the European Union may be next to face tariffs, telling reporters that additional duties on the bloc could be imposed “pretty soon.”

For its part, the 27-nation bloc has pledged to respond to any U.S. duties in a proportionate way.

U.S.-EU automotive trade has traditionally been a core pillar of the European automotive industry’s success.

Tariffs on motor vehicle imports from the EU would likely raise the cost of European cars in the U.S. market, according to an analysis from Oxford Economics. The step will also likely result in a sharp contraction of EU auto exports to the critically important U.S. market.

For Germany, Europe’s largest economy, the prospect of U.S. tariffs on European autos comes at a time when it’s top original equipment manufacturers (OEMs) are already reeling.

Volkswagen, Mercedes-Benz Group and BMW have all issued profit warnings in recent months, citing economic weakness and sluggish demand in China, the world’s largest car market.

Volkswagen on Monday said that it is currently assessing the potential effects of U.S. tariffs on both the company and on the broader automotive industry.

“At the same time, we continue to promote open markets and stable trade relations. These are essential for a competitive economy and for the automotive industry in particular,” the automaker said in a statement.

“We are counting on constructive talks between the trading partners to ensure planning security and economic stability and to avoid a trade conflict,” they added.

A BMW spokesperson described free trade as “one of the most crucial drivers of growth and progress,” noting that “tariffs, on the other hand, hinder free trade, slow down innovation, and set a negative spiral in motion. In the end, they are detrimental to customers, making products more expensive and less innovative.”

 — CNBC’s Michael Wayland contributed to this article.