Ford and GM shares fall after U.S. Commerce department releases its tariff recommendations

Shares of Ford Motor Co. and General Motors Co. fell after the U.S. Commerce Department recommended higher tariff on imported aluminium and steel.  The possibility of these tariffs raising the prices of raw materials for vehicles has generated concern in the market bringing down the share performances.

Both companies reversed gains after Commerce Secretary Wilbur Ross proposed a 24% global tariff on steel shipments into the U.S. and a 7.7% duty on aluminium imports.

The American Automotive Policy Council, a Washington-based trade group that represents GM, Ford and Fiat Chrysler Automobiles NV, forecasted earlier in 2017 that import restrictions would hurt the car industry and its workers.

Ford closed down 1.4 per cent while GM dropped 1.8 per cent in Friday trading. Fiat Chrysler’s U.S. shares remained flat. Rise in prices of raw materials has already affected Ford’s earning and the company has forecasted that profit will further decline this year. GM has projected 2018 adjusted earnings per share will be in line with last year’s result.

The automaker made a paradigm shift in policy by choosing to use the lighter-weight aluminium for the bodies of its lucrative F-Series pickups and biggest sport utility vehicles and it paid back successfully.

Data shows Ford sources 98 per cent of the aluminium and 95 per cent of the steel used for its domestic vehicle production from the U.S. producers. According to the company spokesperson Tom Henderson, GM uses American steel and aluminium for “a vast majority” of its production.

“While we don’t have any specifics to share at this point, we look forward to working with the administration to develop policies that enable U.S. manufacturers to succeed in the U.S. and around the world,” he added.