TOKYO -- Shares of major Asian automakers and suppliers, including Toyota, Nissan, Honda and Mazda, tumbled on Friday after U.S. President Donald Trump threatened to slap tariffs on imports from Mexico from next month, potentially upending a decades-old business model of global manufacturers.
Railing against a surge of illegal immigrants across the southern U.S. border, Trump said he would hit all goods coming from Mexico with a 5 percent tariff, and would increase that each month until reaching 25 percent on Oct. 1, unless Mexico takes immediate action.
The move could hit a number of global companies -- including American and Asian firms -- with the auto industry looking particularly vulnerable. For years automakers have built vehicles in Mexico, taking advantage of its cheap labor, trade deals and proximity to the United States, the world's largest auto market after China.
It also looks also likely to backfire on U.S. consumers, driving up the prices of goods as varied as cars, refrigerators and television sets.
"Margins are so thin in the U.S. market right now that there's no way that any automaker is not going to pass on these tariffs to their customers," said Janet Lewis, an analyst at Macquarie Securities.
"The unknown factor is the impact on suppliers, as components can move back and forth between Mexico, the United States and Canada up to 20 times before they make their way into assembled cars."
In Japan, shares in Toyota fell 2 percent while Nissan dropped 5 percent and Honda nearly 4 percent. Mazda took a bigger hit, tumbling nearly 7 percent. All four operate vehicle assembly plants in Mexico, producing roughly one-third of the vehicles made there.
Autos, nuclear reactors
Vehicles and parts were the biggest imports from Mexico to the United States, totalling $93.3 billion in 2018, followed by electric machines, nuclear reactors, minerals and oil, and optical equipment, according to U.S. government data.
In South Korea, Hyundai and affiliate Kia fell 0.7 percent and 4.2 percent respectively. Hyundai Wia, which supplies auto components to the duo, tumbled 6.2 percent.
"Although we have to wait and see whether the U.S. tariffs plan will be really implemented, this is negatively affecting investor sentiment," said Chang Moon-su, an analyst at Hyundai Motor Securities in Seoul.
Another South Korean company, LG Electronics, said nearly all of its television sets made in Mexico are shipped to the United States, and about a third of its refrigerators.
"As the United States is a crucial market for us, we are closely monitoring this tariff issue," a company representative told Reuters.