Linamar Benefits from Trade War, Secures 200M CAD in Contracts
1min read Linamar, a Canadian automotive parts manufacturer, has unexpectedly found a silver lining in the trade war initiated by the Trump administration. Initially perceived as a potential victim of the tariffs on automobiles and metals, the company has revealed that it may actually benefit from the trade tensions.
During a conference call with analysts, Linda Hasenfratz, the executive chair of Linamar, stated that almost all of the company's products shipped to the United States are exempt from tariffs. This exemption is due to the fact that these components comply with the United States-Mexico-Canada Agreement (USMCA). The company reported that it secured approximately 200 million Canadian dollars in contracts from other suppliers in the first quarter. This significant increase in business is attributed to manufacturers looking to shift production to the United States to avoid tariffs.
Analysts have taken note of this development. Jonathan Goldman of a prominent financial institution suggested that Linamar could become a winner in the automotive tariff landscape. He pointed out that the company is benefiting from increased contract manufacturing opportunities as other manufacturers seek to relocate their production facilities to the United States. Similarly, Brian Morrison of TD Cowen upgraded Linamar's stock rating from "hold" to "buy" based on the same rationale.
Hasenfratz expressed her concerns about the broader impact of the tariffs, particularly on the profitability of original equipment manufacturers (OEMs). She noted that the increased costs of imported components could lead to higher prices for consumers, which in turn could dampen demand and affect the entire automotive supply chain.
Despite the initial market reaction to the tariffs, which saw Linamar's stock price drop by 25% between January 30 and April 8, the company has since recovered almost all of its losses. This resilience is a testament to Linamar's strategic positioning and its ability to navigate the complexities of the trade war. The company's proactive approach to securing new contracts and its compliance with USMCA have positioned it favorably in the current trade environment.
