Shares of U.S. companies have faced pressure due to the latest escalation in Washington’s trade war. Newly imposed tariffs on Canada and Mexico are expected to impact earnings across several sectors, including automakers, retailers, and raw materials. President Donald Trump has imposed 25% tariffs on imports from Mexico and Canada, effective Tuesday, covering over $900 billion in annual U.S. imports from these countries.
Trump also doubled duties on Chinese imports to 20% in response to the U.S. fentanyl overdose crisis, adding to the existing tariffs of up to 25% from his first term. China retaliated with additional tariffs of 10%-15% on certain U.S. imports starting March 10, while Canada and Mexico are preparing swift countermeasures against their long-standing ally.
Economically sensitive stocks, such as airlines and banks, led declines on Wall Street’s main indexes on Tuesday. The benchmark S&P 500 experienced its worst day of the year on Monday following confirmation of the U.S. tariffs.
S&P Global estimates that new duties on imports from Mexico and Canada could cost affected U.S. carmakers 10%-25% of their annual EBITDA. Trump’s 25% tariffs on imported steel and aluminum will also increase costs for the industry, which accounted for 15% of net shipments of iron and steel in 2024, according to S&P Global. J.P.Morgan analysts expect automakers to bear the brunt of direct costs from tariffs on Canada and Mexico, with some burden shared by suppliers, dealers, and consumers.
Stellantis produces 39% of its North American vehicles in Mexico or Canada, while General Motors and Ford Motor produce 36% and 18%, respectively, according to a November report from Barclays. GM’s three plants in Canada manufacture electric vans, the Chevrolet Silverado Heavy Duty truck, the V8 engine, and dual-clutch transmission. Shares of Ford and General Motors dropped 2.8% and 5.8%, respectively, on Tuesday.
U.S. homebuilders, which import raw materials from neighboring countries, are also likely to see increased costs from the new tariffs. Tariffs on finished products such as appliances, electronics, cabinets, and fixtures from Mexico and China can further raise homebuilding costs, S&P Global noted. Building materials companies are experiencing margin pressure from higher commodity, labor, and freight costs, and the new tariffs could exacerbate this stress.
Canada is the U.S.’s top import country and third-largest export country for aerospace by dollar value, according to the Aerospace Industries Association. Mexico has fast-growing aerospace hubs in Queretaro and Chihuahua, attracting large suppliers like Honeywell. Steel imports accounted for about 23% of U.S. steel consumption in 2023, with Canada, Brazil, and Mexico being the largest suppliers. Canada, with abundant hydropower resources aiding metal production, accounted for nearly 80% of U.S. primary aluminum imports in 2024.
Michael Ashley Schulman, chief investment officer at Running Point Capital, noted that as retailers and other businesses warn customers about higher prices from tariffs, there’s a feeling that people will have less discretionary spending available for holidays and vacations. Similarly, businesses may reduce corporate travel to help keep expenses in check and maintain margins. — news from Reuters