Tariffs an ‘existential threat’ for Canada’s auto parts industry, CIBC warns
Canadian automotive parts manufacturers face an “existential threat” from U.S. tariffs, say analysts at CIBC Capital Markets downgrading shares of Linamar (LNR.TO) and Martinrea International (MRE.TO) on Wednesday while slashing price targets.
Auto parts are particularly vulnerable to tariffs since they cross the Canada-U.S. border multiple times before incorporation in finished cars and trucks.
U.S. President Donald Trump imposed a 25 per cent tariff on imported Canadian goods, with a 10 per cent levy on energy products, on Tuesday. The move prompted Canadian officials to respond with counter measures.
On Wednesday, Trump granted a one-month tariff exemption for U.S. automakers on imports from Canada and Mexico. The move follows talks between the administration and leaders of the so-called “Big 3,” Ford (F), General Motors (GM), and Stellantis (STLA).
“Prior to any tariff talk, we had viewed 2025 as a ‘run-of-the-mill’ challenging year,” CIBC Capital Markets analyst Krista Friesen wrote in a note to clients published prior to Wednesday’s announcement.
“We view these tariffs as an existential threat to the industry.”
Friesen downgraded her rating on Linamar and Martinrea shares to “neutral” from “outperform.” She cut her price target on Toronto-listed Linamar stock by 33 per cent, from $82 to $55. She lowered her price target on Martinrea shares by 36 per cent, from $14 to $9.
“Even if these current tariffs are short-lived, we suspect the risk of tariffs will be an overhang on the sector through the Trump presidency,” Friesen wrote. “Given the range of outcomes, it is challenging to estimate what the impact would be to the suppliers’ earnings.”
Linamar shares climbed as much as 5.5 per cent in mid-afternoon trading on Wednesday. The company reports fourth-quarter 2024 financial results after the closing bell.
Martinrea’s stock fell as much as 3.8 per cent. It’s scheduled to report financial results for the three months ended Dec. 31 after markets close on Thursday.
Magna’s stock rose nearly six per cent in mid-afternoon trading.
Shares of America’s Big 3 surged in New York trading following news of the temporary tariff exemption.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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