President-elect Donald Trump said Monday he would impose a 25% tariff on imports from Canada and Mexico until they clamp down on drugs and migrants crossing the border, a move that would appear to violate a free trade agreement between the three countries.
Analysts and experts fear that the tariffs could be more damaging to European automakers such as Volkswagen and Stellantis and their suppliers than any direct tariffs on EU products.
“We hope that mitigation actions will make potentially higher tariffs manageable, but the combined effects of tariffs, stricter CO2 regulation in Europe from 2025 and pressure on profits from stronger competition in China and Europe could increase risk,” S&P said.
“Rating transitions could occur as tariffs compound other headwinds by 2025,” he added.
From 2025, the European Union will reduce the average emissions limit for new vehicles to 94 g/km, down from 116 g/km previously.
According to S&P, the worst-case scenario for automakers includes a 20% tariff on US imports of light vehicles from the EU and the UK, and a 25% tariff on imports from Mexico and Canada.
In this scenario, GM, Stellantis, Volvo and Jaguar Land Rover could see more than 20% of their expected adjusted EBITDA in 2025 at risk, according to S&P analysis.
The risk is between 10% and 20% for Volkswagen and Toyota, and less than 10% for BMW, Ford, Mercedes-Benz and Hyundai.