Automobile manufacturers Ford (NYSE: F) and General Motors (NYSE: GM) rallied Monday after the United States and Canada struck a last-minute deal to replace the North American Free Trade Agreement late Sunday night.
General Motors shares rallied 45 cents, or 1.3% in early morning trading Monday to $34.12, while Ford rose 15 cents, or 1.6% to $34.16. Parts manufacturer Lear Corporation (NYSE: LEA) rose $1.69, or 1.2%, to $146.60
The pending United States-Mexico-Canada Agreement is expected to impact the auto industry most, requiring a greater portion of vehicles to be made in North America and establishing a minimum fixed wage level for car manufacturers.
The USMCA also includes a concession by Canada to effectively cap its automobile exports to the U.S.
For Ford and GM, the new agreement likely comes as a relief after President Donald Trump threatened in May to tax all auto imports in an attempt to safeguard national security.
Tariffs would have been a negative for both manufacturers, according to Moody's analysis, since 30% of GM's U.S. unit sales depend on imports from Mexico and Canada, while 20% of Ford's domestic unit sales depend on such imports.
Ford had said tariffs on metals lopped off $1 billion from the company's bottom line even though it sources most of its steel and aluminum from the U.S.
