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General Motors’ (GM), Ford Motor’s (F), and Ferrari’s (RACE) earnings are likelier than ever to take a hit, as President Donald Trump’s “draconian” tariffs and anti-electric vehicle policies hang over the automakers, according to JPMorgan (JPM) analysts.
The Trump administration’s new 25% tariffs on all imports of parts and finished cars and trucks are set to go into effect on April 3. Almost half of all vehicles sold in the U.S. are imported, as are almost 60% of all parts in vehicles assembled in the U.S.
“Anybody who has plants in the United States, it’s going to be good for,” Trump said Wednesday of his tariffs.
JPMorgan analysts led by Ryan Brinkman lowered their December price target for GM to $53 per share from $64 per share, for Ford to $11 per share from $13 per share, and for Ferrari to $460 per share from $525 per share, according to a Thursday note.
GM stock dropped 3% on Wednesday as Trump made his auto tariff announcement, then slipped as much as 6.5% on Thursday. Ferrari’s stock slid almost 5% on Wednesday but rose 1.6% on Thursday. Ford shares are down 2%. The S&P 500 Automobiles sub-index is up almost 2%, but down 28% year-to-date.
Automakers had received a brief break from Trump’s earlier 25% tariffs on Mexico and Canada after the president said all vehicles covered by the USMCA trade pact would not be subject to duties for one month. That exemption, which primarily benefitted companies like GM and Ford, ends next week.
JPMorgan expects GM to face a $10.5 billion tariff bill, which could rise to $13 billion over time. The automaker imports vehicles from South Korea, Canada, and Mexico. Ford’s bill will be much lower, $2 billion to start, but will gradually rise to $4.5 billion.
The analysts now expect the auto industry to take a $82 billion annual hit, up from an initial estimate of $41 billion, assuming that automakers absorb the cost of the tariffs. If they decide to pass the costs on to consumers, light-vehicle prices could rise by up to 11.4%.
The Michigan-based Anderson Economic Group previously estimated that a 25% tariff on Mexico and Canadian imports would add between $4,000 and $10,000 per unit to vehicles assembled in North America. Trump’s tariffs on imports of aluminum and steel add another $250 to $800 per gas-powered vehicle and up to $2,500 on EVs.
“Under the new scheme virtually all automakers will face significant pressure to raise prices, making it more likely domestic automakers will be able to effect price increases to better offset tariff costs without the risk of material market share loss,” Brinkman said in the note.