Auto stocks took a brutal hit Monday, as Trump’s shocking trade war roiled Wall Street.
General Motors stock was down a bit more than 6% and trading at $46.46 a share at 9:45 a.m., down $3 a share. Ford Motor Co. stock was down nearly 4% and trading at $9.69 a share Monday morning, down 39 cents a share.
Stellantis was trading at $12.43 a share, down 70 cents a share or 5.33% within the first 20 minutes of the trading day Monday.
The U.S. auto industry is a carefully oiled machine when it comes to the vast amount of auto parts that are traded with Canada and Mexico. On top of that, the proposed tariffs could be devastating when it comes to the affordability of cars and trucks, which are increasingly unaffordable for average consumers as it is.
Not surprisingly then, the sell-off in auto stocks was worse than the overall stock market, which was bad enough. The Dow Jones Industrial Average was down 1.47% shortly after 10 a.m., losing 656.89 points to trade at 43,887.77 points.
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How bad things will get is debatable, though, even though much of the atmosphere on Wall Street initially seemed like a level of panic we’ve not seen in quite some time. Things did appear to settle somewhat later in the morning.
Shortly before 10:30 a.m., auto stocks gained ground and GM was down by around 3%, Ford was down around 1.4%, and Stellantis was down around 3%.
The Dow was down around 0.65% shortly before 10:30 a.m.
CNBC quickly reported that pending talks were ahead with Canada on Monday afternoon.
CBC News in Canada reported that Prime Minister Justin Trudeau spoke to President Donald Trump early Monday morning about the pending trade war. No resolutions were reached but Trump reportedly said he would speak with Trudeau at 3 p.m. Monday.
The 25% tariff on Canadian goods is set to go into place on Tuesday. Energy resources from Canada will have a lower 10% tariff.
Shortly after 10:30 a.m., CNBC also reported that Trump paused the new tariffs on Mexico for one month. Mexico President Claudia Sheinbaum posted on social media that Mexico will immediately reinforce the northern border with 10,000 members of the National Guard to prevent drug trafficking from Mexico to the United States, particularly fentanyl.
Trump confirmed the one-month deal via social media Monday morning.
More:Detroit chamber, Fain criticize Trump tariffs; list of affected automakers
Investors, though, will need to realize that uncertainty is the name of the game these days in Washington, and now on Wall Street, as Trump moves quickly to shake up the status quo and trigger chaotic developments.
On Monday morning, the initial recovery on Wall Street showed that the markets were holding up better than expected, according to David Sowerby, managing director and portfolio manager for Ancora Advisors in Bloomfield Hills.
Even so, he said: “Tariffs could well be the catalyst to a correction.”
Sowerby said there is a potential for a 5% to 7% correction on Wall Street, with the stock market averaging a “5% hiccup two times a year.” The market can see a 10% correction once a year.
For investors, Sowerby said, it may be even more important to understand what they own and how those companies are exposed to the three big largest trading partners with the United States — Canada, Mexico and China.
Basic economics classes teach you that tariffs are a tax on consumers, Sowerby noted, and Trump’s tariffs would be no different.
On Feb. 1, the White House announced that it was “addressing an emergency situation.”
“The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act,” according to a White House statement.
Trump was to implement a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada would have a lower 10% tariff, according to the White House fact sheet.
The Wall Street Journal had a blistering editorial posted attacking Trump’s new 25% tariffs on Canada and Mexico, dubbing it the “Dumbest Trade War in History.”
The editorial threw a harsh new word into our vocabulary, autarky.
“Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home,” according to the Wall Street Journal editorial.
“This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out.”
It’s a level of protectionism and distaste for trade that leaders of most countries recognize hurts economic growth. And Wall Street cannot help but keep a careful watch on the situation.
What’s unsettling is how quickly Trump acted on his much-talked-about tariffs so soon after Inauguration Day Jan. 20.
“The announced increase in tariffs were even larger and came faster than we had penciled in,” according to a report issued Monday by BNP Paribas.
As a result, the prices consumers pay for many goods are expected to “rise sharply over the coming months, while tariffs should put the brakes on economic growth,” the according to the report from the French multinational bank and financial service company.
Even if the tariffs prove temporary, the report noted, the fact that Trump imposed the tariffs before negotiating raises the potential economic costs.
The assumption, the report noted, had been that negotiations would prevent tariffs on Canada and Mexico from going into place.
The risk of on-going escalating trade war goes up from here, according to some analysts.
Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X @tompor.
