The auto industry could take a financial hit if the United States imposes new import tariffs on vehicles from Europe, Mexico and Canada.
According to a report by S&P Global, these tariffs could reduce the combined core earnings of major European and US manufacturers by up to 17%, threatening their financial stability and credit rating.
Manufacturers in the spotlight: the most exposed
Luxury manufacturers such as Volvo and Jaguar Land Rover, which operate mostly in Europe, are expected to be among the hardest hit. Companies such as General Motors and Stellantis, which assemble vehicles in Mexico and Canada, also face significant risks.
President-elect Donald Trump recently announced a plan to impose a 25% tariff on imports from Canada and Mexico.
The move is intended to put pressure on both countries to reduce drug trafficking and control migration at the border. However, the decision could violate free trade agreements established between the two nations.
Europe and China: markets under pressure
European manufacturers such as Volkswagen and Stellantis would face not only US tariffs, but also additional challenges in their key markets. In Europe, CO2 emissions regulations are set to be tightened in 2025, reducing the average permitted emissions limit from 116 grams per kilometer to 94 grams.
At the same time, growing competition in China, the world's largest automotive market, is squeezing profit margins. This combination of factors could amplify the impact of tariffs and put the financial viability of these manufacturers at risk.
Actions needed to mitigate repercussions
While S&P anticipates that manufacturers will adopt mitigation strategies to deal with the new tariffs, these alone will not be sufficient. The agency warns that the combined effects of tariffs, stricter environmental regulations and global competition could result in a significant reduction in revenue.
“Credit rating transitions are inevitable if tariffs exacerbate other financial challenges in 2025,” the S&P report said.
In addition, manufacturers could look to diversify their supply chains, relocate production plants and renegotiate commercial terms. However, these measures require time and significant investment, which adds pressure to their financial structure.
The numbers behind the impact
In the worst-case scenario, tariffs would include 20% for vehicles imported from Europe and the UK, and 25% from Mexico and Canada. Under these conditions, the most exposed manufacturers would be General Motors, Stellantis, Volvo and Jaguar Land Rover. They could lose more than 20% of their projected adjusted EBITDA by 2025.
Other manufacturers, such as Volkswagen and Toyota, would face a moderate financial risk, between 10% and 20%. Companies such as BMW, Ford, Mercedes-Benz and Hyundai would be less vulnerable, with risks below 10%.
A global blow to the industry
The impact is not limited to automakers alone. Parts suppliers, especially those that rely on transatlantic and North American trade, will also face disruptions in their supply chains. This could translate into cost increases that would be passed on to consumers.
In addition, uncertainty over trade policies could discourage investment in innovation, delaying technological advances crucial to the transition to electric and sustainable vehicles.
