Auto stocks, led by Tesla (TSLA), charged higher as the US and China reached a temporary trade reprieve, despite the fact that the auto sector was excluded from the deal. But optimism remains.
Two days of high-stakes talks between the US and China have led to a 90-day pause on tariffs, with American tariffs on Chinese goods dropping to 30% from as high as 145% and China’s retaliatory duties to 10% from 125%.
Other sector-specific duties that the US imposed on China before President Trump took office this year on “strategic sectors,” like electric vehicles and steel, are remaining in place and are not changed by Monday’s announcement, according to US officials. Broader tariffs on foreign imports of autos and auto parts still apply to China as well.
Read more: What Trump’s tariffs mean for the economy and your wallet
Despite this, shares of Tesla, GM (GM), Ford (F), and Stellantis (STLA) charged higher as investors hoped more deals were coming on the trade front, reducing the impact of Trump’s broad trade war on corporate profits and the larger economy.
“We believe autos [are] next on the docket for the trade talks and this positive US/China news will give the market hope that Trump and [Treasury Secretary Scott Bessent will] now focus on the 313 [the Big Three auto makers] and US auto industry,” Wedbush analyst Dan Ives said to Yahoo Finance. “We would expect an update over the coming weeks.”
At the moment, the Biden-era 100% tariffs on Chinese EV imports still exist, and Trump’s imposition of 25% tariffs on foreign auto imports and certain auto parts still remain.
Auto sector tariffs are taking a hatchet to automaker profits. GM said its full-year EBIT could take a $4 billion to $5 billion hit from tariffs, Ford said it could take a $1.5 billion hit, and Stellantis pulled its guidance altogether.
Toyota (TM) — the automaker feeling the biggest impact — said tariffs would shave $1.3 billion in operating profits just from April and May alone.
As for imports from China itself, GM imports the Buick Envision from the mainland, and Ford imports the Lincoln Nautilus from there as well. While the impact of tariffs on those models is limited, the broader 25% tariffs on auto parts are of most concern to the automakers.
“The recent rollback on tariffs is a welcome development that will alleviate some immediate supply chain pressures and provide an opportunity for the automotive industry to reassess its strategies,” Steve Patton, EY Americas automotive sector leader, said to Yahoo Finance. “However, the industry requires greater certainty given the complexities of global supply chains.”