Presidential elections have an immense impact on the stock market, especially specific companies tied to policies that can be affected by the incoming president.
The recent election results have already begun to have an impact on our world. The incoming president doesn’t even take office until January, but the proposed policies and programs have an immediate impact on many companies. In this case, automotive companies are already seeing changes in their stock prices. Mind you, the automotive sector isn’t the only area impacted, but that’s what we’re talking about today.
Tariff talks show foreign companies will nosedive
The goal of having more products produced in America has many solutions to the same problem. Much like the first time he was in office, President-elect Donald Trump has stood on a platform of applying massive tariffs to imported products. These tariffs are much greater than the last time around and are aimed at being much greater on goods coming in from China than from anywhere else in the world.
Tariffs cause products to cost more for consumers, which spurns more domestic production of those items. Because the Republican platform strongly supports tariffs, as soon as the election was over, many foreign auto stocks experienced a price drop. These include reductions in prices of:
- BMW and Mercedes-Benz – Down 6.5%
- Porsche – Down 4.9%
- Volkswagen – Down 4.3%
- Li Auto – Down 3.3%
- Nio – Down 5.3%
- BYD – Down 4.5%
- Toyota – Down 0.5%
- Honda – Down 8%
China isn’t the only target
As you can see from the companies already impacted by the proposed tariffs, the negativity is pretty widespread in the auto industry. Trump also made proclamations during his campaign that included a more than 200% tariff on imported vehicles from Mexico. Honda produces nearly 200,000 vehicles in Mexico every year and ships nearly 160,000 of those to the United States.
In addition to the impact that Honda will feel if tariffs on Mexican-built vehicles are levied, many American brands build vehicles in Mexico as well. These vehicles will also be subject to tariffs, which will immediately increase the cost to consumers. Other automakers that have auto plants in Mexico are:
- General Motors
- Ford Motor Company
- Stellantis
- Toyota
- Hyundai-Kia
- Mazda
- Volkswagen
- and others
A plan to block Chinese cars
Most likely, the 200% suggested tariff on vehicles made in Mexico is hyperbole aimed at BYD rather than Honda and other companies that currently build cars in Mexico. Its easy to see from his quote that he is working to keep Chinese companies out of America as much as possible.
“They think they’re going to make their cars [in Mexico] and they’re going to sell them across our line and we’re going to take them and we’re not going to charge them tax, we’re going to charge them – I’m telling you right now – I’m putting a 200% tariff on, which means they are unsellable in the United States.”
-Donald Trump
The overall percentage might be exaggerated, but we can expect imported goods to have a tariff applied to them. Trump’s plans for a 25% tari on imported vehicles to the United States during his first term never came to fruition, but if anything close to this does, the cost of new vehicles will be significantly more than they are now.
Expect actual tariff figures to be much milder than anticipated or on an annually increasing scale to avoid business disruption.
Tesla experienced an immediate surge
Elon Musk’s support of Trump during his campaign wasn’t without its rewards. Shortly after the election, Tesla’s stock soared by nearly 13%, which is much higher than that of most other companies. Although Ford and GM are on the list of companies with plants in Mexico, they both saw small increases since the election. Ford gained 0.3%, and GM gained 0.29%, giving these auto stocks a slight bump, but nothing quite as significant as what Tesla experienced.
The automotive market is heavily reliant on US Steel production, and the steel industry has experienced an increase of nearly three percent since the election.
Auto stocks might level
It’s common for an immediate stock market increase or decrease after a presidential election. The surge for Tesla wasn’t surprising considering Musk’s involvement in the election and campaigning in favor of Donald Trump. Many auto stocks will likely level off as companies experience a return to normal. Still, the proposed tariffs on all incoming products could have a lasting impact on some automakers, and stock prices might continue to decrease over the coming months.
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