Tariffs could push auto prices out of U.S. consumers’ reach, says Morgan Stanley

After President-elect Donald Trump revealed intentions to impose a 25% tariff on all imports from Mexico and Canada on his first day in office in January next year, Morgan Stanley estimated this would lead to risks of significant cost hikes on more than 2.7M vehicles imported to the U.S. market from Mexico and approximately 1M imported from Canada. The firm highlights an outsized impact on General Motors (GM), with 26% and 3% of U.S. sales imported from Mexico and Canada, respectively, and Ford (F), with 17% of U.S. sales imported from Mexico, as well as a number of Japanese, Korean and European peers. The firm believes the ability of exposed automakers to pass on incremental cost hikes will be challenging given a U.S. consumer already facing average monthly auto payments near historic highs and believes OEMs would face the risk of either subsidizing the tariffs through lower margins or volume decline if the threatened tariffs are enacted. Other publicly traded companies in the space include Honda (HMC), Mercedes-Benz (MBGYY), Nissan (NSANY), Stellantis (STLA), Tesla (TSLA), Toyota (TM) and Volkswagen (VWAGY).