Tariff Tussle Sends Shockwaves Through Auto Industry

President Donald Trump's announcement to raise tariffs on Canadian cars and automotive parts from 25% to 50% has sent shockwaves through the auto industry. The new tariff, set to take effect in January 2027, immediately put pressure on Detroit automakers.

Ford Motor Co (NYSE:F) and Stellantis (NYSE:STLA) each fell around 4% Monday, while General Motors Company (NYSE:GM) declined roughly 2%. The impact was not limited to equities, as the proposed tariff could also affect exchange-traded funds (ETFs).

The Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), which holds a diversified portfolio of technology companies and semiconductor stocks, saw its price drop around 2% Monday. Despite this decline, the fund's exposure to Canadian manufacturing is diluted by its broad holdings, including Microsoft Corp (NASDAQ:MSFT) and Alphabet, Inc (NASDAQ:GOOGL).

The First Trust S-Network Future Vehicles & Technology ETF (NASDAQ:CARZ), which takes a similarly broad approach, holds 100 stocks across the vehicle and technology ecosystem. Its largest positions include Microsoft at 5.81% and Samsung Electronics at 4.84%. Tesla represented just 3.94% of the fund.

While automakers may face margin pressure due to the proposed tariff, the bigger question for ETF investors is what happens if it takes effect. A prolonged tariff regime could force automakers to absorb higher costs or raise vehicle prices, potentially benefiting domestic manufacturers and steel producers.