Trump's tariffs another car bashing. Here are the possible countermoves

Watchword, prepare for the beating. Higher tariffs on vehicle imports into the US, expected by the incoming Trump administration, could put heavy pressure on the operating margins of several large global car manufacturers. The introduction of 20% tariffs on imports from the EU and the UK, and 25% from Mexico and Canada, could erode up to 17% of the Ebitda (earnings before interest, taxes, depreciation and amortisation) of the brands involved in the worst-case scenario. This is according to a report by S&P Global Ratings, which analyses the effects of such policies on the main industry players and assesses options to counteract the impact.

Among European manufacturers, Volvo and Jaguar Land Rover (JLR) would be most exposed. Their heavy reliance on European production to serve the US market puts more than 20 per cent of Ebitda at risk, says S&P Global Ratings. Stellantis is equally at high risk but for a different reason: although it has limited exposure to European imports, it suffers from vulnerability related to vehicles assembled in Mexico and Canada, including brands such as Ram and Jeep. In contrast, the German premium brands, Bmw and Mercedes-Benz, are less vulnerable, with an exposure of less than 10% of their Ebitda, due to a more diversified manufacturing strategy and solid production bases in the US.

As far as American car manufacturers are concerned, General Motors and Ford face significant challenges due to vehicles assembled in Mexico. High-margin models such as Gm's Silverado and Sierra are among the most affected. But even the world's number one in terms of volume, Toyota, which has a significant share of production in Canada, risks seeing around 10% of its Ebitda exposed. Toyota and Hyundai-Kia are likely to remain among the top three importers in the US in 2025. The combined volumes are expected to exceed 10% of the two players' global sales.

However, it is the Europeans who import the cars with the highest average prices, 50-70 thousand dollars. And so, according to the report signed among others by Lukas Paul, Vittoria Ferraris and Nishit K Madlani, it would be Volvo that would risk over 30% of its adjusted EBITDA. This is followed by Gm, with over 25%, due to the preponderant production in Mexico. Stellantis 25% and JLR slightly less. Volkswagen 15%, Toyota, Mercedes-Benz and Ford around 10%. Bmw with 8% and Hyundai-Kia with just over 2% close.

The Trump administration's new tariffs, effective 20 January 2025, come at an already delicate time for the global automotive industry. In addition to tariffs, manufacturers have to cope with increasingly stringent environmental regulations in Europe from 2025 (emission limits will be lowered and in order to avoid billion-dollar penalties, manufacturers that do not achieve a sufficient share of electrics sold will have to cut back on thermal car production).