Trump’s tough talk on Canada sends jolt through auto sector

Shares of General Motors (NYSE:GM) and Ford (NYSE:F) surrendered ground Friday afternoon after President Trump’s decision to call off trade talks with Canada spooked the auto sector.

As the two U.S. carmakers with the heaviest exposure to Canadian production, GM (NYSE:GM) and Ford (NYSE:F) shares were hit hardest, retreating 2% to 1.3% from earlier levels, respectively.

Canada and Mexico are both the main source of U.S. imports of vehicle and vehicle parts, as decades of free trade between the three countries resulted in heavy integration of manufacturing and sourcing. While the majority of imports are USMCA compliant, GM (NYSE:GM) recently halted share buybacks, pulled its FY25 sales guidance, and lowered its FY25 profit guidance by as much as 25% to incorporate a $4B to $5B tariff-related headwind.

Ford (NYSE:F) also pulled FY25 guidance and forecast a net adverse adjusted EBIT impact of $1.5B on FY25 from changes to U.S. trade policy.

“Given material near-term risks, especially the potential for industrywide supply chain disruptions impacting production, the potential for future or increased tariffs in the U.S., changes in the implementation of tariffs, retaliatory tariffs and other restrictions by other governments, the company is suspending guidance,” Ford stated early last month.

After an initial knee-jerk reaction to the downside for both General Motors (GM) and Ford (F), both recouped most of their initial losses and closed higher thanks to broader market gains tied to a trade deal with China.

Related tickers: Stellantis (STLA), Honda Motor Co (HMC), Toyota Motor Corp (TM), Rivian (RIVN), Tesla (TSLA).