Chicken Tax 2.0: 3 Million Sales At Risk After Auto Tariffs

Ladies and gentlemen, buckle up! We're diving headfirst into the chaos of the auto industry as President Trump's new 25% tariff on imported cars and auto parts sends shockwaves through the market. Bank of America CEO Brian Moynihan has sounded the alarm, flagging a staggering 3 million sales at risk. This is not just a bump in the road; it's a full-blown crisis that could reshape the automotive landscape as we know it.



The tariffs, set to kick in early next week, are a game-changer. Moynihan warns that car prices are set to skyrocket, and vehicle purchases will slow down. This isn't just about higher sticker prices; it's about the ripple effect that will hit consumers, manufacturers, and the broader economy. Bank of America analysts predict that these tariffs could add a quarter percent to inflation, a figure that might seem small but could have massive implications for consumer spending and economic growth.

Let's break it down:

1. Consumer Impact: Higher prices mean fewer sales. Moynihan notes that while consumers are still spending, the future is uncertain. The tariffs could lead to a significant drop in consumer confidence, which is already down nearly 11% according to the University of Michigan Survey of Consumers. This is a red flag for the economy, as consumer spending drives about 70% of GDP.

2. Manufacturer Pain: U.S. giants like Ford and General Motors are better off than they were when the tariffs were just threats, but they're still facing billions in costs. GM, with 40% of its vehicles sourced from Canada and Mexico, is particularly vulnerable. Ford, with just 7% of its cars from these countries, is in a better position but not immune. The tariffs could cost GM $13 billion and Ford $4.5 billion, according to JPMorgan analysts.

3. Global Ripple Effect: Countries like Japan, which export heavily to the U.S., could see their growth slow down. This isn't just about the U.S. economy; it's about global trade and stability. The tariffs are a direct attack on the interconnected supply chains that have defined the auto industry for decades.

4. EV Makers' Edge: Electric vehicle makers like Tesla, Rivian, and Lucid are the least exposed to these tariffs. Their domestic production gives them a significant advantage. Tesla CEO Elon Musk, who has been a vocal supporter of Trump, acknowledges that the tariffs will affect the price of parts in Tesla cars, but the impact is not as severe as for traditional automakers.

5. Parts Suppliers in Limbo: The tariffs on auto parts are a wild card. Suppliers are better positioned than carmakers but still exposed. The uncertainty about which parts will be hit and how the burden will be distributed adds another layer of chaos. Aptiv is the worst-positioned, while Gentex is the best, according to JPMorgan analysts.



The market is already reacting. Shares of U.S. and international automakers tumbled on Thursday after Trump's announcement. This is just the beginning. The tariffs are set to be permanent, and the market hates uncertainty. The auto industry is in for a bumpy ride, and it's not just about the short-term pain. The long-term implications for the U.S. economy, consumer spending, and global trade are massive.

So, what do you do? Stay away from traditional automakers for now. The uncertainty is too high, and the risks are too great. Focus on EV makers and companies that can navigate this new tariff landscape. This is a time for caution, not for bold bets. The market is in uncharted waters, and it's going to take time to figure out the new normal.

BOO-YAH! This is a crisis, but it's also an opportunity. The auto industry is at a crossroads, and the companies that can adapt will thrive. Stay tuned, because this story is far from over. The tariffs are just the beginning of a new era in the auto industry, and it's going to be a wild ride.