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Automakers face higher tariffs on Mexico, Canada imports

than

Japan

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Detroit Three lobbying group criticizes deal favoring

Japanese

imports

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GM, Stellantis ( STLA ) shares rise on trade deal news

By Nora Eckert and David Shepardson

DETROIT, July 23 (Reuters) - Shares of General Motors ( GM )

, Ford Motor ( F ), and Jeep-maker Stellantis ( STLA ),

some of the biggest automakers in the U.S., rallied on Wednesday

after news of a trade deal that will reduce tariffs on imported

Japanese cars, as investors saw it as a sign of more deals to

come.

But the companies are not celebrating.

Automakers importing vehicles into the U.S. from Japan now

face a 15% levy, according to terms of the deal outlined on

Tuesday by U.S. President Donald Trump, down from 27.5%.

GM shares rallied 9% and Stellantis ( STLA ) rose 12%, as market

watchers said they anticipated further agreements could reduce

other trade barriers that have hurt the companies' profits.

Ford shares rose about 2%. The automaker is less exposed to

tariffs because it produces more of its U.S.-sold vehicles

domestically.

On Wednesday, the European Union and United States were nearing

a trade deal that would also set a 15% tariff on European

imports.

GM, Ford and Stellantis ( STLA ) have been paying up to 25% on

vehicles imported from Mexico or Canada, depending on how much

U.S. content is in the vehicles. The companies are concerned

they could soon be paying higher tariffs on vehicles assembled

in Mexico or Canada than on vehicles with significantly less

U.S. content made in Japan or the United Kingdom.

Some lobbyists also expressed alarm that if South Korea

strikes a similar deal with the U.S., it could become a low-cost

market to assemble cars and trucks.

"They could be the new Mexico," one lobbyist told Reuters.

The American Automotive Policy Council, which represents the

Detroit Three, criticized the deal, saying it creates an easier

path for Japanese imports than for some cars built in North

America.

Even before Tuesday's deal, Detroit automotive executives

raised concerns that Trump's trade policy could end up giving an

edge to foreign automakers who do not invest as heavily in U.S.

manufacturing.

"This is a bonanza for our import competitors," Ford CEO Jim

Farley said in February, when Trump initially proposed levies on

Mexico and Canada, but not on major automotive centers such as

South Korea.

The Japan trade announcement came the same day General Motors ( GM )

said tariff costs knocked $1.1 billion from its bottom line,

hurt by a battery of levies including 25% taxes on imports from

Canada and Mexico, and 50% on steel and aluminum imports.

Industry consultant and former GM executive Warren Browne

said the Japan deal "put all vehicles produced in Mexico and

Canada by the Detroit Three at a disadvantage" because they face

higher levies than Toyota ( TM ) vehicles shipped in from Japan, for

example. That could allow the foreign brands to undercut U.S.

car companies on price.

Toyota ( TM ), Subaru and Mazda ( MZDAF ) are

among the most reliant companies on Japan-produced vehicles for

their U.S. sales, and stand to benefit most from the lower

tariffs, according to business-analytics firm GlobalData. Toyota ( TM )

imported roughly 500,000 vehicles from Japan last year.

Japanese automotive stocks soared after the trade deal

announcement.

Autos Drive America, which represents those Japanese

automakers along with other foreign car companies operating in

the United States, on Wednesday praised the trade deal, saying

it would lead to further factory investment in the U.S.

The deal is good news for Wade Kawasaki, executive chairman

of the Wheel Group, a collection of aftermarket wheel, tire and

accessory companies based in California. Kawasaki said the group

has been trying to break into some aspects of the Japanese

market, and the lessening levies will help with that.

"There is a certain group of customers who want

American-made products. Those are the ones we were going to

get," he said.