Stellantis reported that Trump’s tariffs resulted in nearly $350 million in direct costs and lost production during the first half of 2025. Early estimates indicate total losses could hit $2.7 billion due to tariff expenses, attempts to increase profitability, and compliance with new emissions regulations. In North America, the automaker experienced a 25% drop in sales for the quarter ending in June. This decline was partly due to lower production and shipments of imported vehicles impacted by tariffs. These tariffs, which started on April 2, included a 25% tax on imported vehicles and auto parts, disrupting supply chains across the U.S., Mexico, and Canada.

Production Halt

Stellantis stopped production at its facilities in Windsor, Canada, and Toluca, Mexico, leading to 900 layoffs in Michigan and Indiana. Trump clarified that these tariffs would not add to those already in place on steel and aluminum. The company mentioned tariffs six times in its earnings report for the first half of the year and postponed its guidance on April 30 due to gaps between expected and actual performance. Other challenges facing the company include changes in product offerings, cutting inventory levels, and difficulties with dealer relationships. With these significant challenges from the new trade policy, we see an opportunity to adopt a bearish stance on the carmaker. Purchasing put options on its stock allows us to profit from the expected price drop as these costs impact earnings. The stock has already lagged behind the S&P 500 by more than 30% this year, indicating a weak trend that these new factors are likely to worsen.

Market Response

The cancellation of forward guidance brings a lot of uncertainty, making volatility an opportunity for trading. We are considering long straddles, which involve buying both put and call options, to benefit from large price movements in either direction. In the past, auto stocks showed significant fluctuations and low valuations during the 2018-2019 trade disputes, a trend we expect to see again. These supply chain issues will not just affect one company. Other automakers, like General Motors and Ford, heavily reliant on Mexican production, are also at risk. Since Mexico was responsible for over $100 billion in U.S. vehicle and parts imports last year, we are looking into bearish positions throughout the entire sector. The production halts are particularly harmful due to the company’s existing inventory problems. Reports from earlier this year indicated that some brands had more than 100 days’ supply of vehicles, almost double the industry average. This surplus of unsold inventory will magnify the financial fallout from closing key North American production lines. The options market reflects considerable risk, with the implied volatility of the manufacturer’s stock trading at a premium. This makes buying options pricier but underscores the market’s worries about upcoming earnings. We see this increased cost as a necessary investment in anticipation of further negative news. Create your live VT Markets account and start trading now.

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