Auto stocks fell victim to more trade war escalation as China said it will raise its tariff on US goods to 84%, in retaliation to President Trump’s tariffs tit-for-tat strategy on Chinese imports that kicked in on Wednesday.
Beijing’s latest move comes after Trump followed through on a threat to add a 50% tariff on Chinese goods, in addition to 34% reciprocal tariffs, raising the overall tariff rate on Chinese goods to 104%.
GM (GM) and Ford (F) dropped on Wednesday morning before recovering, while shares of German automakers Volkswagen (VOW.DE), BMW (BMW.DE), and Mercedes (MBG.DE) fell in overseas trading due to their exposure to the US auto market, where 25% tariffs on all imports are the new reality.
Automakers have been scrambling to respond to the daily drip of tariff escalations that began once Trump started his tariff war in earnest following his April 2 “Liberation Day” event.
Read more: What Trump’s tariffs mean for the economy and your wallet
“Across OEMs, we are beginning to see a dispersion of reactions, ranging from immediate price discounts in the near-term (Ford + Stellantis), to others that will hold prices constant at least for the next 1-2 months before [reevaluating the] situation,” Deutsche Bank analyst Edison Yu wrote in a note to clients on Tuesday. “There is also some capacity re-alignment occurring including GM raising output at its Fort Wayne facility and Stellantis pausing some plant operations in Mexico/Canada. In respect to suppliers, Stellantis has been more vocal about helping to absorb costs along with Toyota, although the % of pass-through is still unknown.”
With regard to the crucial auto parts supply chain, it is currently unknown at what level these components — some of which are difficult or impossible to source domestically — will be tariffed. The Commerce Department has until May 3 to provide guidance on those duties.
Interestingly, China’s acceleration of tariffs on US products will actually have some impact on autos that are made in the US and destined for Chinese buyers.
According to the China Automobile Dealers Association (as first reported by Automotive News), US vehicle exports to China fell 13% to 109,000 units; however, that made the US the third-largest vehicle exporter to China, behind Japan and Germany.
Ford’s Lincoln luxury brand exported 20,516 vehicles to China, making it the largest American vehicle importer to China. Lincoln’s full-size Navigator SUV is among those products popular in China.
Germany’s BMW exported approximately 20,000 vehicles from the US to China, that are assembled at BMW’s plant in Spartanburg, S.C. SUVs like the X4, X6, X7, and range-topping XM are built at the plant and exported to China.