The Return of 'Gwanseman'... US and European Car Companies Hit Hard

Wall Street Warns:
"The Downside Is Open"

The U.S. imposed a 25% tariff on imports from Mexico and Canada as scheduled on the 4th (local time), causing the stock prices of American and European automakers to fall simultaneously. On Wall Street, there were warnings of further declines, with voices saying "the downside is open."

On the previous day at the New York Stock Exchange (NYSE), the stock prices of American automakers such as Ford (-2.88%), GM (-4.57%), and Stellantis, the parent company of Chrysler (-4.38%), all fell together. This represents a larger drop than the Dow Jones Industrial Average (-1.55%) and underperformed the market returns.

The Ford Expedition was exhibited at the Canadian International AutoShow held on the 13th of last month in Toronto, Ontario, Canada. As the United States imposed a 25% tariff on imports from Mexico and Canada on the 4th (local time) as scheduled, the stock prices of American and European automobile manufacturers fell simultaneously. Photo by Reuters and Yonhap News.

According to the capital market specialized media Barron's, analyst Daniel Rosecka of Bernstein said in a recent report, "The return of the 'Tariff Man' means further declines in auto stocks," and predicted, "There will be greater downward pressure unless the tariffs are withdrawn."

He particularly expected profit margins in the North American supply chain and auto industry to decline. According to Bernstein, the annual impact from cost increases and supply chain disruptions due to tariffs is expected to reach $40 billion. This far exceeds the total operating profits earned last year by GM, Ford, and Stellantis, which amounted to $34 billion.

Rosenberg Research also stated in a recent report that "the North American auto industry is falling into a severe recession," diagnosing that "this will have strong ripple effects across manufacturing and service industries." They also added a warning that the possibility of an economic recession has increased.

Douglas Bush, founder of ChartSmarter and a chart analysis expert, predicted that Ford's stock price would find support at around $8.5, more than 10% below the closing price on the 3rd. He suggested a support level of $45 for GM but did not provide a separate outlook for Stellantis.

In European stock markets, the stock prices of automakers and parts suppliers such as Volkswagen (-4.13%), BMW (-5.89%), Stellantis (-10.16%), and Continental (-11.64%) plummeted.

The Euro Stoxx 600 auto and parts index fell more than 5%, marking the largest drop since September 2022.

Stifel Research forecasted that if companies bear the full burden of tariffs, Volkswagen would face an 8 billion euro sales hit this year, and Stellantis would suffer double that amount at 16 billion euros. Operating profits are expected to decrease by 12% for Volkswagen and 40% for Stellantis. Volkswagen and Stellantis are the largest exporters of North American-bound small cars made in Mexico among European exporters.

In response, the industry is scrambling to avoid the tariff bomb triggered by Trump. Continental, a tire and parts supplier operating seven factories in Mexico, told Reuters, "We cannot bear additional tariffs," and stated that it will optimize its supply chain.