10 Stocks Hit Hardest by U.S. Tariffs on Canada & Mexico—Risk or Opportunity?

It’s finally official after weeks of speculation. On February 1, 2025, President Trump signed executive orders imposing new tariffs—25% on Canadian and Mexican imports (with a 10% rate on Canadian energy) and 10% on Chinese goods.

The backlash was swift. Canada and Mexico are considering retaliatory tariffs, escalating tensions into what could become a full-blown trade war, while China has taken legal action against the U.S..

Since trade tariffs on China are not new and the 10% rate is lower compared to the tariffs on Canada and Mexico, this post will focus on companies with significant exposure to the latter two markets.

From a macro view, Canada and Mexico export a wide range of goods to the U.S. (see tables below), including crude oil, machinery, automotive parts, electronics, and raw materials.

However, the impact of tariffs isn’t always straightforward and can have complex ripple effects. For example, Canada is a major supplier of crude oil to the U.S., particularly to Midwest refiners like Phillips 66 (PSX) and Valero Energy (VLO). At first glance, these companies seem vulnerable to higher input costs as they import large amounts of Canadian crude. However, crude oil prices have risen due to concerns over reduced supply, which allows refiners to pass down rising costs to consumers. Over the longer term, U.S. domestic production may increase, easing supply constraints. This makes the ultimate impact on refiners uncertain—short-term volatility, but potential long-term stabilization.

While some industries may adapt, others face a more direct hit from the tariffs. In this post, we break down 10 stocks most affected by the trade dispute, examining whether they present an opportunity or a risk for investors.

Carmakers: Ford (F), General Motors (GM) and Stellantis (STLA)

Automobiles rank among the top exports from Canada and Mexico to the U.S., making carmakers some of the most obvious casualties of the new tariffs. Ford’s heavy reliance on a highly integrated North American supply chain—sourcing a significant portion of its parts from Mexico and Canada—makes it particularly vulnerable to retaliatory tariffs. The higher costs of imported components could either squeeze margins or be passed on to consumers, making its vehicles less competitive in an already price-sensitive market.

General Motors, like Ford, operates within a deeply interconnected supply chain, with roughly a quarter of its production occurring outside the U.S. Any counter-tariffs from Canada and Mexico could lead to higher input costs, further pressuring profit margins. The auto industry is already contending with increased costs due to the transition to electric vehicles, and these tariffs add another layer of complexity.

Stellantis, which has significant exposure to production in Mexico, faces an even tougher situation. With fierce competition from both traditional automakers and new EV players, it may find it difficult to fully pass on these rising costs to consumers. Instead, the company might be forced to absorb a significant portion of the tariff-related expenses, which could put further strain on its profitability.

Given the already challenging landscape, where automakers are grappling with the expensive shift to EVs, rising production costs from tariffs could accelerate the need for consolidation within the industry. Companies that fail to adapt efficiently may struggle to remain competitive in this evolving and increasingly costly environment.

Freight: Canadian Pacific Kansas City (CP)

Canadian Pacific Kansas City (CP) operates a 20,000-mile rail network that seamlessly connects Canada, the United States, and Mexico, making it a vital player in North American trade. As a major freight carrier facilitating cross-border commerce, the company is set to feel the full weight of the newly imposed tariffs.

Higher costs on imports could lead to a decline in trade volume as businesses scale back shipments or seek alternative routes, reducing demand for CP’s transportation services. A slowdown in freight movement would directly impact the company’s revenue, as fewer goods crossing the borders translate to lower shipping volumes and pricing pressures.

Beyond declining trade flow, the company may also face operational and financial adjustments. Customers affected by tariffs may push for lower shipping rates to offset rising costs, forcing CP into difficult negotiations. Existing service agreements and long-term contracts could also come under pressure, particularly if businesses reassess their supply chains and shift manufacturing elsewhere. Managing resources efficiently will be critical, as the company may need to realign its assets, personnel, and routes in response to shifting freight demand.

CP was created through a transformative merger in 2023 when Canadian Pacific Railway acquired Kansas City Southern, forming the first and only single-line rail network spanning all three North American countries. At the time, the deal was touted as a game-changer, offering unparalleled efficiency for cross-border trade. However, the introduction of tariffs now places CP at the epicenter of a growing trade war, turning what was once a strategic advantage into a potential liability. As businesses adjust to the new cost structures imposed by tariffs, the railroad will need to adapt quickly to maintain its role as a key conduit for North American trade.