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Trump’s 25% Auto Tariffs Threaten U.S. Automakers With Downgrades and Demand Collapse

Barclays and S&P warn of financial strain on Ford and GM, as analysts predict steep price hikes and a significant drop in vehicle demand.

A view shows signage on a branch of Barclays Bank in London, Britain, March 17, 2023. REUTERS/Peter Nicholls/ File Photo
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President Trump's tariffs are expected to have a severe effect on U.S. auto sales this year.
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Overview

  • Barclays downgraded the U.S. auto sector to 'negative,' citing mounting earnings pressure and reduced investments due to the Trump administration's 25% auto tariffs.
  • S&P flagged Ford and GM as high-risk for credit rating downgrades, with Ford rated BBB- and GM at BBB, as tariffs disrupt global supply chains.
  • Analyst Dan Ives estimated that vehicle prices could rise by $5,000 to $15,000, potentially leading to a 15-20% drop in U.S. auto demand this year.
  • The tariffs are expected to add $100 billion in annual costs to the U.S. auto industry, which relies heavily on imported parts from Canada and Mexico despite being labeled as 'U.S.-made.'
  • President Trump has hinted at potential short-term exemptions for parts imported from Canada and Mexico, but no concrete details have been announced, fueling uncertainty within the industry.