Thursday morning proved especially bloody for car companies across the world’s time zones as President Donald Trump made another order upending global trade relations.
Specifically, the Republican escalated America’s trade war against the world as his administration announced a new 25% tariff – effective on April 3 – on all vehicles manufactured outside the U.S.
The sharpness of stock market and political reactions was alike, with German carmakers’ shares falling violently and world leaders voicing their opposition to the White House’s move.
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By press time on March 27, the American automotive giant General Motors (NYSE: GM) appeared to be the biggest loser.
Why General Motors stock is crashing
GM shares fell off a cliff as the Thursday session started, rapidly collapsing to their press time price of $47.51. The crash ensured the stock is 8.71% in the red in the one-week chart and 10.76% down year-to-date (YTD).
While General Motors opiates numerous plants within the U.S., the price collapse is consistent both with the company’s international presence, and the earlier warnings that some car parts cross the border up to eight times before reaching assembly lines, meaning they are subject to the new levies.
Furthermore, a case of significant sector contagion on Thursday may exist as other American automobile giants have also been collapsing.
Other than GM, Ford (NYSE: F) has been struggling since the morning bell and has crashed from its latest closing price of $10.30 to its press time price $9.91.
Tesla emerges as a winner of the tariff announcement
Interestingly, though its core electric vehicle (EV) business and its attempts to become a big tech company both make it susceptible to supply chain shocks, Tesla (NASDAQ: TSLA) started the March 27 session positively. With its press time price of $279, it is 2.50% up in the 24-hour chart and 15.48% in the green in the last seven days.
TSLA stock’s reaction could be attributed to the fact that the company manufactures all of the vehicles it sells in the U.S. within the country, unlike both Ford and General Motors. Still, this does not mean it is guaranteed to go unscathed, as up to a third of the vehicles’ components are imported.
Lastly, it is worth pointing out that the latest developments regarding car stocks are probably little more than news-induced volatility. The long-term impact of President Trump’s decision and of the likely retaliatory tariffs is not likely to be seen at least until the higher dues come into effect in April, and possibly for even longer.
Featured image via Shutterstock
