A 25% Mexico/Canada Tariff Would Have a Material Negative Impact on Most European Auto Stocks

US President Donald Trump announced a one-month reprieve on March 5, 2025 for automakers from the 25% blanket import duty imposed on goods imported from Mexico and Canada. The delay to automakers, negotiated by Detroit's Big Three—Ford, General Motors, and Stellantis—aims to equalize the playing field among automakers importing vehicles into the US from countries other than Mexico and Canada that are not yet paying tariffs, and to provide time to initiate the process of moving production into the US. Under the scenario where this import duty is made permanent, it will materially affect the financial outlook for most of our European auto original equipment manufacturer coverage. We estimate it will reduce our fair value estimates by between 20% and 30% for no-moat Stellantis, BMW, Mercedes, and Volkswagen. Given the uncertainty around the quantum or duration of tariffs, we maintain our fair value estimates for now.