President Trump delivered a surprise tariff threat to Mexico Thursday evening, which sent General Motors shares falling 3 percent in early Friday trading.
Bloomberg reported Friday the Trump administration seeks to impose a 5 percent tariff on Mexico if the country does not start to better enforce its side of the border. Ultimately, President Trump wants to stop migrants traveling through the country and entering the U.S. illegally. In the threat, the president said the tariffs could climb to 25 percent on goods produced in Mexico if the country does not step up security to stop migrants.
Of the U.S. automakers, GM is poised to fare the worst if the tariffs are implemented. The report shows of GM’s entire North American production, 28 percent of it takes place in Mexico. Adding 5 percent to each car built there will increase the price of new vehicles sold in the U.S., unless GM decides to absorb the extra cost internally on cars assembled at its Mexico facilities. Nevertheless, it would be a blow to revenues and profits for the automaker.
Not to mention the sheer number of vehicle components produced in Mexico and shipped to the U.S. for domestic auto production would also take a hit.
“Without a response from manufacturers or the supply base to shift production footprints, this would likely increase the price of vehicles for the consumer and negatively impact automaker/supplier margins,” Goldman Sachs analyst David Tamberrino said.
The tariffs will take effect on June 10 unless the situation changes between the U.S. and Mexico. The possibility of tariffs also calls the North American Free Trade Agreement into question, which still remains in place. The Trump administration’s USMCA trade agreement has yet to be ratified in Congress. It’s also unclear how these new tariffs may affect the USMCA deal itself.
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Source: Bloomberg
Comments
Border protection should not be a one sided effort. With Mexico, that seems to be how it is. I’m sure that there is illegal crossing on the US/Canada border, but there seems to be a bi-partisan effort on both sides.
Mexico on the other hand…
don’t worry. after mexico pays for that wall, problem solved.
Actually, Trump is being a hypocrite. The Canadian-US border effort is completely one-sided….. all the effort is from Canada. We’ve seen over 25,000 illegal immigrants cross the border into Canada in the last year alone. Most are refugees who landed in the US, but the US is actually pushing these people across the border into Canada illegally (and our dumba$$ Prime Minister Justin “Trust Fund Baby” Trudeau is doing nothing about it). So Trump is doing exactly what Mexico is doing to the US.
Trump is just a bully, plain and simple. He doesn’t negotiate. He just makes threats and half the time he caves on them, the other half the time he goes through with them and in the end, it ends up affecting American people as their employer’s costs of materials go up, costs of products go up, etc. Look at the steel and aluminum tariffs. American companies were hurt by them and in the end, he removed them.
I have zero sympathy for the plants that were shut down, as those were the worst plants for GM to deal with at contract time. Unions had their place at one time and were much needed, but today they do very little but make public statements and take their members union dues to pay themselves good wages.
I know two people who worked at GM plants for 25 yrs, and they had the most cushy contract anyone every heard of. Top notch wages compared to peers at other manufacturer’s plants, best benefits I’ve ever seen, and even got paid 2/3 of their salary even if their shift was laid off; all they had to do was show up and sit in the lounge all day. A good friend worked at a Honda plant in Ontario and for years he tried to get into Oshawa because his income would have gone up by 27%, as well as a much better benefits, group and retirement package. That told me how over-paid compared to peers the GM plant workers actually were.
In the last number of years, we see more problems per vehicle with US built vehicles than we do with Mexico built vehicles. It is amazing how quality and efficiency can go up when workers know they can be replaced within the hour by another worker if they don’t perform as compared to union workers who are basically impossible to fire for poor quality of work. (Why do people think Japanese vehicles always had the best reliability….. because they used to be build in Japan where workers building them did quality work or else they were replaced. Today, their quality has dropped and the only real different factor….. US factories with union workers). Unions have become one of the largest factors in today’s “entitlement” attitude amongst workers. You don’t have to perform top notch to get top notch compensation any more because you are “entitled” to equal compensation as top notch workers because you have the same job title.
If I were Mexico, I’d be driving people across the border by the semi-load and overload the US border control to the point it would put such a drain on their system, Trump would have to work “with” Mexico on the issue rather than make threats.
Go ahead and thumbs down my comment. I really don’t care. Americans are the most hated people around the globe not because of jealousy, but because of the American attitude of superiority over others that many American’s have (I am not lumping all Americans under that umbrella as there are many very nice and humble Americans). American workers who work around the world can even buy a “Canadian Flag” travel package which allows them to put a Maple Leaf or Canadian flag on their work clothes, wear a Canadian hat and other things when over seas to pass themselves off as Canadians. Pathetic if you ask me.
25k is not good per year but the southern boarder is expecting 1,000,000 illegal crossings next year.
The El Paso crossing just had 1,000 illegally cross this week and the video is on line,
Not many illegal immigrants pass through the USA for a Canadian destination and they sure don’t want to stay in Mexico. Yep, the whole world hates us? Do you know anyone wanting to leave?
that’s false and Canadian immigration has been deluged by Americans who want to relocate to Canada for the last 2 years.
Wouldn’t have to worry about this problem if they built cars for the US market in the US. But hey, at least they saved all those labor costs on the Blazer and passed those on to the consumer right? ¯\_(ツ)_/¯
General motors should not complain what they pay their auto workers in Mexico is pretty bad compared to our auto workers and all the cars are priced the same so where is all that cash going to not the consumer
it is going to the bottom line … to the shareholders who expect gm to make a profit and receive a dividend.
Steve you’re hundred percent correct
Steve –
Make a profit, they have.
Pay a dividend, they have.
Increase price per share, not so much.
33-40 has been the trading range for
9 years now.
So profit, as a shareholder, is reliant on a 4% (before taxes) dividend.
Unless you’re GM mgt, and get options at artificially reduced price-per-share prices.
Sorry to keep harping in this, but the New GM hasn’t proven they’re a long-term hold in 9 years.
i agree but i think most if not all auto stocks have under performed over the last decade. the only company that has killed it as far as stock price is tesla.
anyway, i think the real question is if you believe in gm’s story. that is profits from today will be used to finance the r&d necessary for the autonomous/electric vehicle world in 10 years or so.
if you agree, then what they are doing makes sense. they are trying to create a war chest that will get them through the next downturn and build that AV/EV bridge.
i think they’ve got the pieces. and unlike tesla who have all their eggs in one basket, gm’s margin of error is bigger. say instead of 10 years it takes 15 or 20 before EVs and AVs takeoff. gm will still have non-EV products and sales to keep them going.
so to paraphrase russell westbrook, why not gm?
What you fail to state here is the cost of living is very cheap in Mexico. Their GM wages go much farther there than they would here.
Also their employees are not wanting to come here because they are gainfully employed unlike those coming here.
Tell the President to significantly increase the tariffs on products coming from Korea! My wife just took delivery of a new GMC Terrain Denali, and I was shocked to see the car (truck/suv?) was equipped with Hankook tires! This is a GMC vehicle, for crying out loud! Put Goodyear or at least Michelin tires on it for God’s sake! If I wanted Korean tires, I would have insisted she purchase a Hundai or KIA, which will never, never, never, never, ever sit in one of our garage spaces!
you don’t want korean tires so obviously the solution is to increase tariffs on korea?
that makes a heck of a lot of sense.
“This is a GMC vehicle, for crying out loud! Put Goodyear or at least Michelin tires on it for God’s sake!”
Michelin isn’t American either.
Strange way of thinking, because I was under the impression that the Americans were on pretty good terms with the South Koreans, but not so much the French.
The terrain IS made in mexico
Vern,
Tires are obvious. You would be shocked at the amount of Chinese parts in your GMC….
Just about every vehicle manufacturer has a good percentage of Mexico sourced parts. The entire auto industry now has good reason to raise selling prices.
I support Trump from Canada ??. Mexico is paying for the wall!
Im no Trump fan by any means ( I personally cant stand him) but I do agree with him on tariffs. I keep hearing prices are going to go up but everyone seems to forget every time you turn around GM is giving rebates in massive amounts I’ve personally seen up to 12 grand on a truck and look at the buick encore there’s always pretty good rebate’s on them and there built in south Korea oh and by the way their the highest paid auto workers in the world if you don’t believe get your Google machine out and check it for yourself. and also
GM made over six billion dollars last year so they can afford to pay the tariff our move production for the US market here and not worry about it
The stable genius/retard /dotard strikes again.
You’re clearly speaking of yourself… oh, is that your mom telling you to get off the computer and find a job??
GMs problem are of their own making. Their “leadership team” (leadership is not something GM does well and its team is pathetic) has not delivered for a decade. Typhoid Mary was appointed by BS and is a miserable failure, GM products lead in zero categories and even their newest vehicles come in 2nd or 3rd in competitive reviews. Their interiors are 2nd rate at best, styling is forgettable, value is extremely low, and product launches over the last 5 years have been failures.
Only pathetic losers would link President Trump to GMs miserable track record…
And the hits keep coming for General Motors CEO Mary Barra who thought she was smart by moving work to Mexico because of the new proposed NAFTA deal and now could be facing a 25-percent tariff on all GM vehicles imported from Mexico which will make them non-competitive which means Barra will need to head to DC and plead for a wavier from Trump or be in real trouble.. as the new 2019 Chevrolet Blazer could be 25-percent higher in price.