European and American automakers face potential losses of up to 17% of their combined annual core profits if the U.S. follows through with plans to impose import tariffs on vehicles from Europe, Mexico, and Canada, according to a new report from S&P Global released on Friday.
The report raises concerns that the auto sector could face significant financial and credit challenges in the event of such tariffs, particularly as the industry grapples with already rising production costs and shifting global trade policies.
Among the most vulnerable to the proposed tariffs are premium carmakers Volvo and Jaguar Land Rover, which primarily produce their vehicles in Europe.
Also at risk are American giants General Motors (NYSE:GM) and Stellantis (NYSE:STLA), which manufacture large volumes of cars in Mexico and Canada, both of which could face a 25% import duty under President-elect Donald Trump’s proposed trade policy.
The tariffs, announced by Trump on Monday, would impose significant duties on imports from both Canada and Mexico unless those nations take further action to curb illegal immigration and drug trafficking across their borders.
While Trump’s move is widely seen as a response to broader immigration and border security concerns, it also risks violating the North American Free Trade Agreement (NAFTA) that has governed trade among the three countries for nearly three decades.
S&P Global analysts have warned that the proposed tariffs could have a more detrimental impact on European carmakers such as Volkswagen and Stellantis than any direct tariffs targeting European Union goods.