Back on the campaign trail, Donald Trump proudly donned the title of “tariff man.” Now, with his return to the Oval Office, he’s staying true to his word.
Trump has slapped a 10% tariff on imports from China and isn’t stopping there. He’s got a roadmap lined up to introduce reciprocal tariffs with all of America’s trading partners. The White House plans to enforce a 25% tariff on imports, including key commodities like aluminum, steel, cars, medicines, and computer chips. Although a 25% tariff on imports from Canada and Mexico has been put on a brief hold, Trump made it clear this week that these tariffs are very much on the agenda.
The impending threat of a trade war with major U.S. trading partners spells trouble for several stocks, with three in particular facing potential downturns by 2025 due to Trump’s tariff maneuvers.
### 1. General Motors
General Motors’ shares have already taken a hit this year, despite reporting solid fourth-quarter earnings back in January. The decline can be attributed to several reasons, but Trump’s tariffs have been a significant point of concern.
Investors have every reason to feel uneasy. GM stands as the top exporter of light vehicles made in Mexico to the U.S. While most of its operations are anchored in the U.S., a significant 12% are based in Mexico.
Moreover, GM’s challenges are not limited to Mexico. The auto giant also has substantial operations in Canada and China, along with joint ventures in both countries focused on battery production and raw materials.
During GM’s Q4 earnings call in January, CEO Mary Barra assured that the company is coordinating across its supply chain and logistics to cushion any short-term impacts from potential tariffs. But despite the proactive responses, I suspect GM might still come out on the losing end due to Trump’s current and planned tariff actions.
### 2. Lenovo Group
Lenovo, the leading name in the global PC market, has so far enjoyed a stellar year with its stock rising over 30%. Yet, the company may face some hurdles, mainly because it’s a Chinese firm based in Hong Kong.
About 34% of Lenovo’s revenue hails from North America, with a significant chunk likely originating from the U.S. Of its 11 manufacturing sites, four are in China, and two in Mexico. The rest are spread across Brazil, Hungary, India, Japan, and the U.S. While Lenovo could beef up production domestically or divert shipments from other locations, Trump’s tariffs would still deal a considerable blow.
Bear in mind, Trump had previously proposed hiking tariffs to 60% on Chinese imports. His former trade representative, Robert Lighthizer, labeled China as a severe threat and advocates for even higher tariffs. If Trump concurs, Lenovo could face an even steeper drop.
Lenovo’s CEO Yuanqing Yang, however, isn’t fazed and recently argued that tariffs might actually benefit Lenovo. While he might be onto something, I wouldn’t hold my breath.
### 3. Magna International
Mirroring GM, Magna International, a leading Canadian auto supplier, has not been faring well this year. Its stock has dipped around 8% year-to-date and plummeted nearly 30% over the previous year. I anticipate these struggles will continue into 2025 given Trump’s tariff strategy.
In its 2024 third-quarter outlook, Magna spotlighted “increasing trade protectionism” as a notable risk, pointing to a candidate’s (read Trump’s) platform hinting at hefty tariffs across all U.S. trading partners, possibly triggering a full-blown trade war.
As a major supplier to top U.S. automakers like GM, Ford, and Stellantis (formerly Chrysler), any tariffs hurting these auto leaders will inevitably affect Magna too.
### A Word of Caution
My forecast that GM, Lenovo, and Magna could see significant losses in 2025 hinges on the tariffs staying intact. However, this may not hold true.
Should predictions that inflation will rise from these tariffs prove correct, the Trump administration might pivot away from protectionism. The administration has already postponed tariffs on Canada and Mexico once, and the temporary nature of these tariffs shouldn’t come as a surprise.
