Stocks of automakers around the world fell on Thursday after President Trump announced plans to impose 25% tariffs on imported cars and some parts starting next week.
Among the hardest hits were automakers based in Germany, Japan and South Korea. They sell many cars in the US and rely on complex cross-border supply chains, including production sites in Mexico and Canada.
Shares of Volkswagen, Europe's largest automaker, fell 1.5%. Other German automakers like Mercedes-Benz and BMW fell 2-3% in early European trades.
Stellantis, the parent of Chrysler, Fiat, Jeep, Peugeot and Lamb, saw European stocks fall by around 4%.
Japan's Toyota Motor, Honda Motor and Nissan Motor stocks all fell by about 2% in Tokyo. South Korean Hyundai Motor and Kia shares fell 3-5% in Seoul.
Major Detroit automakers building parts of their vehicles in Canada and Mexico were also hit hard. General Motors shares fell more than 6% in pre-market trading, while Ford shares fell about 3%.
Shares of India's Tata Motors have ceased nearly 6%. The company owns the British company Jaguar Land Rover and imports all luxury cars for sale in the US. German Porsche imports all cars it sells in the US as its stock fell 4%.
Almost half of all vehicles sold in the US are imported, with almost 60% of the parts of the vehicle assembled there being imported. For many foreign automakers, the US is an important market. Almost one for three Porsches, one for every six BMW. German companies also export around $8 billion in auto parts to the United States.
“With every country in the world being affected, it is likely that it will be difficult for a country like Germany to redirect a car to a third country and sell it there,” an analyst at Commerzbank wrote in a memo.
The poor car inventory cut benchmark stock indexes in large exporters. Germany's DAX fell by almost 1%, South Korea's Kospi fell by 1.4%, and Japan's Nikkei 225 fell by 0.6%.
On Wednesday, Trump said he expects car rates to be permanent. Still, many financial analysts believe that economic damages are very serious and could reduce tariffs.
“I don't think it's likely that a new tariff regime will continue, with widespread damage across industry and the impact of inflation on the US economy,” analyst at Bernstein wrote.
However, investors have recently been wrong with the administration's aggressive trade approach. This also includes imports of all US goods from China and sudden additional tariffs on the majority from Canada and Mexico. Trump and his advisors say a recession is possible, emphasizing that short-term pain is worth it in the long run.
“If these create a market slump that appears to be non-temporary, it is difficult to determine the duration of such a chainsaw-like policy,” added a Bernstein analyst.
Stock market fallout on Thursday was primarily concentrated in the automotive industry. The S&P 500 Index futures suggested it would open slightly higher after falling more than 1% on Monday in news that car rates would be announced after the market closed.
Tesla shares can suffer more tariffs than their competitors as they sell all cars sold in the US in California and Texas, but were slightly stronger in pre-market transactions. Trump said Wednesday that Tesla's chief executive Elon Musk, who played a leading role in the White House, had no impact on his decision to impose tariffs.
