Tariff Warning on the Auto Sector

Every week that goes by seems to include a new announcement on tariffs. On Feb. 14, President Trump said he would apply tariffs on automobiles as soon as April 2, 2025.On April 1, members of his cabinet will report the options for levying import duties. This will have a significant impact on global trade. Before that, Trump set a 25% tariff on all imported steel and aluminum. Those are key raw materials for the auto industry.Stock markets long expected troubles ahead for the automotive sector. Shares of Ford Motor (F) traded as low as $9.10, after peaking at $14.85 in July 2024. General Motors (GM) is on a downtrend, peaking from above $60 and closing at $48.37 on Feb. 14. Stellantis (STLA) hovered in the $13 - $14 range since last October. However, the stock has a bullish multiple bottom at $12.50. That suggests that STLA stock might bounce from here.Tariffs will only add uncertainties for U.S. automakers. They have a global supply chain whose prices will rise due to tariffs. The cost will depend on the response from U.S. trade partners.Ford Co-CEO Jim Farley applauded Trump on looking at all vehicle imports to the U.S. Farley said that comprehensive trade policies are imperative in “achieving the president's vision to strengthen the U.S. auto industry."Given the uncertainties, investors should continue to avoid U.S. automotive stocks.