The shares of General Motors (GM), Ford and Stellantis rose on Wednesday, after Trump’s administration postponed auto tariffs against Mexico and Canada by one month.
Stellantis shares jumped around 7%, while GM’s rose 5%.
Only General Motors’ shares have remained positive over the last year, despite today’s gains between 4% and 7%.
All three stocks are in the red on a year to date basis.
Trump extends tariff pause
The White House said Wednesday that President Donald Trump will grant automakers an exemption of one month from the newly-imposed tariffs against Mexico and Canada.
Karoline Lavitt, White House Press secretary said: “We will give an exemption of one month on all autos that come through USMCA.” She was referring to Trump’s first-term trade agreement.
Leavitt said that while the reciprocal tariffs are still in effect, they will be temporarily suspended at the request from companies involved with the USMCA. This is to avoid economic hardships.
On Tuesday, senior administration officials met with executives of Ford, GM and Stellantis.
Howard Lutnick, the Commerce Secretary had hinted at exceptions being considered. He said that adjustments to tariff policy may be announced on Wednesday.
A temporary reprieve could be granted to automakers to give them time to move more production and investment to the US. This is a demand made by Trump.
In his Tuesday evening address to the joint session of Congress, President Trump suggested that tax incentives could be offered to purchasers of US manufactured cars.
The impact of Trump’s auto tariffs
Detroit’s Big Three automobile manufacturers have warned that tariffs could lead to serious consequences.
The warning was that the price of cars could rise by up to thousands of dollars in a matter minutes, causing consumers to find it more difficult and expensive.
Tariffs can also cause severe disruptions in supply chains that may impact on production timelines and deliveries.
According to Anderson Economic Group, tariffs against Canada and Mexico may cause US auto prices to rise by up $12,000.
According to the study, building a cross-over utility vehicle will cost at least $4,000.
The impact on electric cars could be greater still, as costs may triple.
Analysts have also highlighted the risks of profitability. They suggest that tariffs may significantly reduce or wipe out profits for US automakers.
Dan Levy, an analyst at Barclays, estimates that the tariffs, which are now being delayed, could wipe out all profit for Detroit’s automakers if they do not make adjustments.
Levy, however, sees an opportunity to buy in this recent weakness. He argues that such tariffs are not likely to be in place for a long time.
Levy’s letter stated that “given the possibility of significant disruptions ahead, we believe this is a reminder about why tariffs are likely to be this large.”
Analysts believe higher tariffs are more likely to be used in the future as a tool for negotiation than permanent policy change.
As new information becomes available, this post GM Ford Stellantis rally after Trump delays auto tariffs against Mexico and Canada could be updated.
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