Al Root

Tariffs of 25% on imports of Mexican and Canadian goods go into effect on Tuesday. That spells trouble for U.S. car makers who have spent more than 30 years operating with North America as one free trade zone.

Investors, for now, are left to figure out where shares of Ford Motor, General Motors, and Chrysler parent Stellantis can go before they are attractive again.

"The return of the Tariff Man [means] more downside to auto stocks unless tariffs are reversed," wrote Bernstein analyst Daniel Roseka in a Monday report. "We anticipate severe disruptions in North American supply chains and automotive profit margins."

Roeska estimates an impact of $110 million a day in higher costs and supply-chain disruptions. That's $40 billion annually. GM, Ford, and Stellantis generated about $34 billion in operating profit in 2024, combined.

The $40 billion isn't the total effect on those three companies. Auto makers will raise prices, and work to offset tariff impacts. What's more, Roeska is looking at both auto makers and suppliers. Still, Roseka's math helps quantify the industry headwind.

The stocks aren't trading like all the profits will evaporate, though the share-price performance hasn't been great. Coming into Tuesday trading, shares of Ford, GM, and Stellantis were down about 11% on average since the Nov. 5 presidential election. The S&P 500 was up about 1%.

"The North American Auto sector is about to head into the abyss, and the space has powerful multiplier effects both in the goods and services sectors," wrote Rosenberg Research on Tuesday. The firm believes a recession is now likely.

Investors should know where to look for the bottom of the abyss. ChartSmarter founder and market technician Douglas Busch tells Barron's that Ford stock has support about $8.50, down another 10% from Monday's close.

He isn't making a fundamental call on the stock price. Technicians use stock charts and market history to get a sense for where investors have bought and sold shares in the past. Support represents a level where investors might step in and buy the dip.

Busch's levels for GM stock is about $45 a share, down another 5%. He doesn't have a view on Stellantis stock.

Car stocks falling another 5% to 10% may give investors a chance to reassess the damage. If the tariffs remain in place, however, it will be a long year for car stocks.

Car stocks might get to Busch's levels sooner than later. They were weak early Tuesday. Ford and GM shares were down about 2.5% and 4%, respectively. Stellantis stock was down 4.4%, while the S&P 500 and Dow Jones Industrial Average were down about 1% and 1.1%, respectively.

Tariff fears are starting to impact everything, and car stocks may have lost their brakes.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 04, 2025 10:28 ET (15:28 GMT)

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