Auto stocks resilient as U.S. spares Canada and Mexico

Shares of some of the world’s biggest automakers appeared surprisingly resilient on Thursday, even after U.S. President Donald Trump’s 25% tariffs on foreign auto imports came into effect.

Germany’s Volkswagen, Mercedes-Benz Group and BMW were all trading around 2% lower at 1 p.m. London time (8 a.m. ET), while Milan-listed Stellantis dipped 1.6%. Shares of Sweden’s Volvo Cars, however, tumbled more than 11%.

Stateside, Ford and General Motors were both around 2% lower in premarket trade.

Analysts and economists said the relatively muted response from auto stocks could be partly attributed to an exemption for Canada and Mexico — where many carmakers have production hubs — from Trump’s highly anticipated “reciprocal” tariffs announcement.

In a major speech, Trump on Wednesday said his plan would set a 10% baseline tariff across the board, with even higher targeted tariff rates of 34% on China, 20% on the European Union and 46% on Vietnam.

The White House said Canada and Mexico would be exempt from the baseline 10% tariff rate, as well as from reciprocal levies for specific countries for now.

“The long-awaited U.S. reciprocal tariffs announced have been large and broad-based, but critically exempt Canada and Mexico (at least for now) through CUSMA/USMCA compliant trade,” economists at RBC Capital Markets said in a research note published Wednesday.

“Tariffs on imports from Canada are still set to rise on Thursday. Auto tariffs announced last week will still push the average U.S. tariff rate on imports from Canada to about 3.5% from 2.5% by our count,” RBC’s Nathan Janzen and Claire Fan said.

“That increase will still matter, but looks small now compared to dramatically higher tariffs set to be imposed on other countries,” they added.

Trump had previously announced a 25% tariff on all imported vehicles, with charges coming into effect as of Thursday. The White House has said a tax for automobile parts will be launched on May 3.

The president’s back-and-forth announcements on tariffs have alarmed global investors, corporate executives and U.S. trading partners in recent months.

Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, on Thursday said that the initial resilience in the automotive sector could be partly explained by investors getting some clarity on Trump’s 25% levy on automobile imports.

Asked whether Canada and Mexico’s exemption from the new tariff regime might be proving supportive for autos stocks, given that these two countries are integral to the North American supply chain, Luman said there is still “huge uncertainty” about the impact of Washington’s “reciprocal tariff” policy.

He added that the imposition of U.S. tariffs would likely trigger “significant” price hikes and a sharp fall in car sales over the coming months.

“We have these tariffs and much of the impact is already priced in, I would say, in stock prices, especially after last week’s announcement and prior to that,” Luman told CNBC over video call.

“The impact will be felt quickly, I would say, in terms of pricing of cars because there is limited stock. There is stock, but not for months and months. There has been some frontloading but after the stock is sold out, prices will be raised, in my view, because the margins are fairly limited,” Luman said.

“I think investors will probably react by still reducing their exposure to the sector,” Thomas Besson, head of autos research at Kepler Cheuvreux, told CNBC’s “Squawk Box Europe” on Thursday.