LIVE MARKETS-Motor city meltdown? Barclays says tariff fears are running on empty

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MOTOR CITY MELTDOWN? BARCLAYS SAYS TARIFF FEARS ARE RUNNING ON EMPTY

With uncertainty over tariffs still prevailing, U.S. automakers might be worrying too much about new trade deals, Barclays says.

While Ford F.N, GM GM.N, and Stellantis STLAM.MI claim that agreements with Japan, the EU, South Korea, and the UK put them at a disadvantage, Barclays says many foreign carmakers already build most of their U.S. vehicles in North America, meaning the lower tariffs won’t change much.

In July, GM, Ford, and Stellantis raised concerns over a trade deal that would cut tariffs on Japanese auto imports to 15%, while keeping Canadian and Mexican tariffs at 25%.

The U.S. imposed a 25% tariff on autos and parts in April, but reciprocal deals have since lowered that rate to 15% for select countries.

The American Automotive Policy Council and the United Auto Workers say these deals favor foreign automakers, especially non-unionized firms.

But Barclays finds that many of these companies already assemble most of their U.S. bound vehicles in North America, effectively sidestepping the tariffs.

Honda 7267.T assembled 99% of its U.S. sales in Mexico, Canada or U.S. last year. Toyota 7203.T and Nissan 7201.T exceeded 75%.

Even Hyundai's 005380.KS Kia, which imports 55% of its U.S. sales from Korea, has announced a $21 billion investment in U.S. production.

Meanwhile, GM imported 17% of its U.S. sales from Asia, and Ford and Stellantis source up to 38% from Mexico and Canada, regions subject to similar net tariff rates, as per Barclays estimates.

Furthermore, Barclays notes that U.S. automakers get tariff breaks on parts they import to build cars in the U.S.

Parts from Mexico and Canada that meet United States-Mexico-Canada Agreement (USMCA) rules aren’t taxed right now

While the tax exemption is currently temporary, Barclays expects it will become permanent.

(Akriti Shah)

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