Raphael Stevens

Stock prices of foreign automakers fell sharply Wednesday amid concerns the U.S. will hike tariffs on imported vehicles under President-elect Donald Trump.
Trump has regularly said he will increase tariffs on new vehicles from China, Europe and Mexico, where many automakers have established manufacturing hubs.
Most major automakers have factories in the U.S., but they still heavily rely on imports from other countries, including Mexico, to meet U.S. consumer demand.

Republican presidential nominee and former U.S. President Donald Trump speaks during a campaign town hall meeting, moderated by Arkansas Governor Sarah Huckabee Sanders, in Flint, Michigan, U.S., September 17, 2024. 
Brian Snyder | Reuters

DETROIT — Stock prices of foreign automakers, including Chinese and German manufacturers, fell sharply on Wednesday amid concerns the U.S. will hike tariffs on imported vehicles under President-elect Donald Trump.
European-traded shares of BMW and Mercedes-Benz were off around 6.5%, while Porsche was down by 4.9% and Volkswagen declined 4.3%. Shares of U.S.-traded Chinese automakers such as Li Auto and Nio also were down 3.3% and 5.3%, respectively. Over-the-counter shares of BYD, which aren’t publicly listed in the U.S. but can be bought through a broker, declined 4.5%.

Trump has repeatedly said he will increase tariffs on many products, including new cars and trucks from China, Europe and Mexico, where many automakers, including Europeans, have established manufacturing hubs.
U.S.-traded shares of Japanese automakers Toyota Motor and Honda Motor closed Wednesday up less than 0.5% and down 8%, respectively. Both also reported declines in quarterly earnings earlier in the day.
Trump made several proclamations regarding tariffs during his campaign, including calling for a more than 200% duty or tax to be levied on imported vehicles from Mexico. He also has threatened, as he did during his first term in office, to increase imports on European vehicles.

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Honda Executive Vice President Shinji Aoyama warned of increased costs to the company’s operations if there are increases in tariffs. He said Honda produces roughly 200,000 vehicles annually in Mexico and ships about 160,000 of those to the U.S.
“That is a big impact,” he said when discussing the company’s most recent financial results. “It is not just Honda. … All of the companies are subjected to the same situation. And, in short, I wouldn’t think that the tariff will be imposed soon.”

Aoyama later added, “Maybe we would go for production elsewhere not subject to U.S. tariffs.”
Most major automakers have factories in the U.S. However, they still heavily rely on imports from other countries, including Mexico, to meet U.S. consumer demand.
General Motors, Ford Motor and Chrysler parent Stellantis also have plants in Mexico. So do Toyota, Honda, Hyundai-Kia, Mazda, Volkswagen and others.
Under the previously negotiated North American Free Trade deal, and the United States-Mexico-Canada Agreement, or USMCA, that replaced it, automakers increasingly have looked to Mexico as a less expensive place to produce vehicles than in the U.S. or Canada.

Trump and Democrats alike said they believe the trade deal, which Trump negotiated during his first term, needs to be changed to address potential plans for Chinese manufacturers such as BYD to establish auto factories in Mexico to export vehicles to the U.S.
“They think they’re going to make their cars [in Mexico] and they’re going to sell them across our line and we’re going to take them and we’re not going to charge them tax,” Trump said Tuesday evening. “We’re going to charge them — I’m telling you right now — I’m putting a 200% tariff on, which means they are unsellable in the United States.”
Wall Street analysts speculate such tariffs could be hyperbole, citing Trump’s plans for an up to 25% tariff on imported vehicles to the U.S. during his first term that didn’t come to fruition.
“To be clear, we do not expect aggressive new tariffs in a possible Trump Administration (i.e 100%+). But the challenge for investors will be around rhetoric, especially with the USMCA up for renegotiation in 2026. Trade uncertainty could weigh on Auto stocks broadly, as we saw from 2018-early 2020 (during the height of the US-China trade war & NAFTA negotiations),” Wolfe analyst Emmanuel Rosner said Wednesday in an investor note.
BofA’s John Murphy shared similar thoughts: “We anticipate a tougher approach to trade and tariffs although we believe policy changes will be milder than announcements in order to minimize business disruption.”
— CNBC’s Michael Bloom contributed to this report. More

Retail analysts and trade groups are warning President-elect Donald Trump’s proposed tariff policy could lead to higher prices for consumers.
Companies like Five Below, Crocs, Skechers, Amer Sports and American Eagle Outfitters could be forced to raise prices or take profit cuts because of their exposure to China.
The CEO of E.l.f. Beauty told CNBC it could raise prices under the proposed hikes, which are far higher than the tariffs Trump imposed during his first presidency.

Shoppers walk through the Fashion Centre at Pentagon City, a shopping mall in Arlington, Virginia, February 2, 2024.
Saul Loeb | Afp | Getty Images

For retailers and consumers finally feeling some relief from inflation, President-elect Donald Trump’s tariffs proposal introduces fresh uncertainty around how prices could change during his presidency, analysts said Wednesday.
Trump, who NBC News projects won a second term in a decisive victory, said during his presidential campaign that he would impose a 10% to 20% tariff on all imports, including tariffs as high as 60% to 100% for goods from China.

Companies, retail trade groups and industry analysts have warned the move could fuel higher prices on a wide range of Americans’ purchases such as sneakers and party supplies.
“The adoption of across-the-board tariffs on consumer goods and other non-strategic imports amounts to a tax on American families,” National Retail Federation CEO Matthew Shay said in a statement Wednesday. “It will drive inflation and price increases and will result in job losses.”
Earlier this week, the NRF released a study on the impact of Trump’s proposed tariff increases and said they would lead to “dramatic” double-digit-percentage price spikes in nearly all six retail categories that the trade group examines. Those categories are apparel, footwear, furniture, household appliances, travel goods, and toys.
The cost of clothing, for example, could rise between 12.5% and 20.6%, the analysis found.
The CEO of E.l.f. Beauty, which primarily relies on China to manufacture its beauty products, told CNBC in a Wednesday interview it could be forced to raise prices if the proposed tariff hikes take effect. 

“We do have pricing power. If we saw we needed to leverage pricing, we would,” said E.l.f. CEO Tarang Amin. “It will depend on what we see in terms of the tariffs. It depends on the magnitude of the tariffs.”
In a research note Wednesday, GlobalData managing director Neil Saunders said tariff hikes would “create an enormous headache” for retailers, which are likely to pass those costs on to consumers. The result is likely to be softer spending from already price-conscious shoppers.
“Despite Trump’s assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves. This means the cost of buying products from overseas, whether directly or as an input for manufacturing, would rise sharply,” said Saunders. 
“Given the trade between Chinese manufacturers and US retailers, a strict tariff policy would mean retailers initially either taking a massive hit on profits or being forced to put up prices, which would fuel inflation and dampen retail volume growth,” he said.
Over time, supply chains would adjust to this change in tariff policy but it would be “incredibly disruptive” in the short term, said Saunders.
“The small hope is that the tough talk on tariffs is more of a negotiating ploy and that what is finally implemented will be relatively modest in scope,” he said.

Companies most exposed to tariff hikes

Whether a retailer will suffer from proposed tariff increases will vary based on where their goods come from and whether they have the pricing power and popularity to drive higher profit margins or raise prices.
In a Bank of America research note, retail analyst Lorraine Hutchinson said Five Below, Crocs, Skechers, Amer Sports and American Eagle Outfitters are at higher risk, because 20% or more of their goods are sourced from China. As a result, she downgraded her rating on Five Below stock from neutral to underperform, saying the company doesn’t have “the pricing power to mitigate hefty tariffs.”
On the other hand, companies like Bath & Body Works — which sources about 85% of its products from North America — would be less vulnerable, Hutchinson said.
She said Trump-backed corporate tax cuts could benefit retailers, but high tariffs would outweigh those tax savings.
Deep discounters, such as Dollar Tree, are also exposed because their fixed-price-point business model makes it difficult to pass on higher prices to customers, said Peter Keith, a senior research analyst at Piper Sandler. The store, which sells discretionary items like toys and party hats, imports many of its items from China and has set prices of $1.25. That means the company needs to either absorb higher costs or shake up its price point model altogether, he said.
Bank of America also downgraded Yeti Holdings from buy to neutral because of its high exposure to China. However, unlike Dollar Tree, its fan following and higher profit margin may give it enough cushion to absorb cost increases or raise prices.
Yeti’s 20-ounce tumblers typically cost $35, but the company has an approximately 60% margin on the item, Piper Sandler’s Keith noted.
Plus, Yeti and other companies have already been working to diversify their supply chains and move manufacturing outside of China so they’re less reliant on the region and its risks. By the end of 2025, Yeti has pledged to move about half of its production to regions outside of China.
E.l.f. has taken a similar approach, said CEO Amin. 
“Back in 2019 when 25% tariffs came in, almost 100% of our production was in China,” said Amin, referring to tariff hikes Trump imposed during his first presidency. “We’ve been diversifying, so we’ve got supply in other parts of Asia, in the U.S., in Europe. So less than 80% of our supply is out of China now, and I would expect it to be a little bit less going forward.” 
Part of E.l.f.’s value proposition is its ability to offer prestige products at a discount, but Amin said he’s not worried about consumers trading down if the company ends up raising prices. He pointed to its popular lip oil, priced at $8, and its closest equivalent: Dior’s Lip Glow Oil, which is priced at $40. 
“I even told our group, like, why did we price it at $8? We should have priced it at $10,” said Amin. “So maybe I’ll get my chance now, but we’ll see.” 

More sticker shock?

For consumers, tariffs could contribute to more sticker shock on a wide variety of purchases — from car repairs to toys — just as inflation cools. Some companies, including AutoZone, have already told investors that they will raise prices to cover the additional costs. 
“If we get tariffs, we will pass those tariff costs back to the consumer,” AutoZone CEO Philip Daniele said on an earnings call in late September. He said the company typically hikes prices ahead of tariffs going into effect.
Customers could also pay more for a six-pack of beer, a bottle of Scotch, or even a pack of Oreos, thanks to tariffs.
Analysts from equity research firm TD Cowen pointed to a few at-risk companies, including Constellation Brands, which makes its beers Corona Extra and Modelo Especial; liquor company Diageo, which imports tequila from Mexico and Scotch from Scotland; and Mondelez, which makes some of its cookies and snacks in Mexico.
Shoes for adults and kids would cost more, too, if Trump’s proposed tariffs go into effect, said Matt Priest, CEO of Footwear Distributors and Retailers of America, a trade group that counts Nike, Walmart and others as members.
About 99% of all footwear sold in the U.S. is made overseas, he said, and it would be difficult to move a meaningful chunk of that production back to the States, even if a cost penalty is tacked on.
“Count us skeptical that there’s a pathway for us to figure out how to make two and a half billion pairs of shoes in the U.S. every year,” he said.
“The rate of inflation is declining,” he said. “It would be counterproductive to then turn around and go back to pulling one of those inflationary levers, which would be additional tariffs, at a time when the consumer’s telling all of us, both politically on last night’s results, as well as from a consumer perspective: ‘We don’t want higher prices.'” More

Stellantis announced plans Wednesday to cut a manufacturing shift and indefinitely lay off roughly 1,100 workers at a Jeep plant in Ohio.
The company has been battling high inventory levels and lower earnings this year.
The Toledo South Assembly plant produces the Jeep Gladiator pickup truck.

A view of the Jeep Plant where United Auto Workers members are picketing on September 18, 2023 in Toledo, Ohio.
Sarah Rice | Getty Images

DETROIT — Automaker Stellantis announced plans Wednesday to cut a manufacturing shift and indefinitely lay off roughly 1,100 workers at a Jeep plant in Ohio.
The company, which has been battling high inventory levels and lower earnings this year, said the decision at its Toledo South Assembly Plant to cut production to one shift will better align output with demand of the Jeep Gladiator pickup — the factory’s sole product.

“As Stellantis navigates a transitional year, the focus is on realigning its U.S. operations to ensure a strong start to 2025, which includes taking the difficult but necessary action to reduce high inventory levels by managing production to meet sales,” Stellantis said in an emailed statement.
The layoffs will be effective as early as Jan. 5, according to Stellantis. The automaker announced the layoffs in conjunction with required notices to government agencies under the Worker Adjustment and Retraining Notification Act.
The United Auto Workers union, which represents Stellantis employees at the plant, did not immediately respond for comment.

In accordance with the company’s 2023 contract with the UAW, Stellantis said it will provide laid off employees with one year of supplemental unemployment benefits in combination with any eligible state unemployment benefits, equalling 74% of their pay, followed by one year of transition assistance. Health-care coverage also will continue for two years.    
Stellantis, including its Jeep brand, is attempting to execute a turnaround plan following a yearslong decline in U.S. sales. Jeep, a coveted brand in the automotive industry, has been in a U.S. sales rut that has included five years of annual sales declines, with 2024 on pace to potentially become the sixth.

The plan has included lowering pricing across its lineup, including on high-volume models such as the Jeep Compass and Grand Cherokee SUVs; rolling out special offers such as incentives or 0% financing; and increasing spending on marketing and advertising.
Jeep’s U.S. sales have plummeted 34% from an all-time high of more than 973,000 SUVs sold in 2018 to less than 643,000 units last year. While most auto brands increased sales last year, Jeep was off by about 6%. More

The average rate on the 30-year fixed mortgage surged 9 basis points Wednesday to 7.13%, according to Mortgage News Daily.
Housing stocks reacted in turn, with both the big public builders and building material companies falling sharply.
Lennar, D.R. Horton and PulteGroup were all down Wednesday. Retailers Home Depot and Lowe’s were also lower.

Homes in the south suburban Chicago area on April 26, 2023.
Brian Cassella | Tribune News Service | Getty Images

President-elect Donald Trump’s victory spurred a rise in in the U.S. 10-year Treasury yield. Mortgage rates, which loosely follow the benchmark yield, are also climbing.
The average rate on the 30-year fixed mortgage surged 9 basis points Wednesday to 7.13%, according to Mortgage News Daily. That is the highest rate since July 1 of this year, though not quite the surge some had expected.

“The expectation among bond traders coming into the election was that rates would move higher in the event of a Trump victory and especially a red sweep. While the latter is not yet clear, the former is enough for another bump to rates that have already risen abruptly with Trump’s victory odds,” said Matthew Graham, chief operating officer at Mortgage News Daily.
Housing stocks reacted in turn, with both the big public builders and building material companies falling sharply. Lennar, D.R. Horton and PulteGroup were all down more than 4% in midday trading Wednesday. Retailers Home Depot and Lowe’s also fell, more than 3% apiece.
“The builder stocks are highly sensitive to mortgage rates and mortgage rate expectations. Inflation expectations are higher now, which impacts long-term rates,” said John Burns, CEO of John Burns Real Estate Consulting.
While Trump did not lay out a detailed housing plan, he did talk about deregulation and opening federal land for more home construction.
The National Association of Home Builders congratulated the president-elect with a statement from its chairman, Carl Harris, saying, “NAHB looks forward to working with the incoming Trump administration and leaders in Congress from both parties to enact a pro-housing legislative and regulatory agenda that increases the nation’s housing supply and eases the nation’s affordability woes.”

Big builders have been buying down mortgage rates for their customers, but that has been cutting into their margins.
Mortgage rates hit a recent low of 6.11% on Sept. 11, but have been rising steadily since, despite the recent rate cut by the Federal Reserve. Mortgage rates don’t follow the Fed, but do react to the central bank’s thinking on the economy. Stronger-than-expected economic reports in September and October caused bond yields, and consequently mortgage rates, to move higher.
To put it in perspective for consumers, a homebuyer purchasing a $400,000 home with a 20% down payment on a 30-year fixed mortgage, would have had a monthly payment of $1,941 in early September. Today that payment would be $2,157, a difference of $216.
Sales of existing homes have seen an unusual surge this fall. Pending sales, which represent signed contracts, rose 7% in September compared with August, according to the National Association of Realtors. That was before rates surged significantly higher.
The sales increase is largely due to more supply. There were 29.2% more homes actively for sale in October compared with October 2023, reaching the highest level of active inventory since December 2019, according to Realtor.com.
“The path ahead is anyone’s guess and will ultimately be determined by inflation, the economy, and Treasury issuance,” Graham added.

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Planet Fitness wants to acquire bankrupt budget fitness chain Blink Holdings, according to court filings viewed by CNBC.
Planet Fitness previously lost out in a bankruptcy auction against U.K.-based, privately held fitness chain PureGym.
Equinox Group-owned gym chain Blink Fitness filed for bankruptcy protection in August after a failed attempt by the luxury fitness group to enter the budget-friendly market.

A Blink Fitness location in New York City.
Bill Tompkins | Michael Ochs Archives | Getty Images

Planet Fitness wants to acquire bankrupt budget fitness chain Blink Holdings, according to court filings viewed by CNBC.
Planet Fitness previously lost out in a bankruptcy auction against U.K.-based, privately held fitness chain PureGym. Now the U.S. chain, with a public market valuation of roughly $6.8 billion, is making another attempt.

Equinox Group-owned gym chain Blink Fitness filed for bankruptcy protection in August after a failed attempt by the luxury fitness group to enter the budget-friendly market. Since then, its more than 100 fitness centers have been tied up in bankruptcy court.
Last week, PureGym won the bankruptcy auction for Blink and its assets, including 60 of its gyms in New York and New Jersey, with a bid of $121 million, according to bankruptcy filings.
An acquisition of Blink locations would expand PureGym’s U.S. operations after the company first entered the market in 2021.
Planet Fitness’s initial bid was rejected in part because of concerns around antitrust considerations, people familiar with the matter told CNBC. Planet Fitness already owns a significant share of the fitness club market with more than 2,000 clubs in the U.S., according to estimates by Piper Sandler.
In making a subsequent play for Blink, Planet Fitness has submitted two offers, according to the filings.

One proposal offers $142 million for Blink’s assets, including a $28.4 million deposit, provided that Planet Fitness is not required to address antitrust concerns in advance.
A second proposal increases the offer to $155 million with a $31 million deposit and includes making select regulatory filings that address antitrust concerns in advance.
A Delaware bankruptcy court will hold a hearing Wednesday at 11 a.m. ET to consider the new bids.
Planet Fitness did not respond to CNBC’s request for comment.

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CVS Health reported mixed third-quarter results as higher medical costs squeezed its bottom line.
The company expects elevated medical costs to continue to pressure its performance this year, “and as a result we are not providing a formal outlook at this time,” a spokesperson said.
It’s CEO David Joyner’s first earnings report at the helm of the troubled retail drugstore chain. CVS named a new president for its health insurer, Aetna, effective immediately: Steve Nelson, the former CEO of UnitedHealthcare, a division of UnitedHealth Group.

A person walks by a CVS Pharmacy store in Manhattan, New York, on Nov. 15, 2021.
Andrew Kelly | Reuters

CVS Health on Wednesday reported mixed third-quarter results as higher medical costs squeezed its bottom line. The earnings report is CEO David Joyner’s first at the helm of the troubled retail drugstore chain. 
The company expects elevated medical costs to continue to pressure its performance this year, “and as a result we are not providing a formal outlook at this time,” a spokesperson told CNBC. CVS will provide commentary on what it expects “directionally” during its earnings call, the spokesperson said. 

“Establishing credibility and earning the trust of our investors is one of my top priorities as the new leader of CVS Health,” Joyner said in a statement. “To achieve that, any guidance we provide should be achievable, with clear opportunities for outperformance. This is a core principle for me.”
Wall Street’s confidence in CVS has soured this year after three straight quarters of full-year guidance cuts, prompting pressure from an activist investor to turn the business around.
Shares of the company are down nearly 27% for the year as higher medical costs in its health insurance unit, Aetna, eat into its profits, reflecting seniors who are returning to hospitals to undergo procedures they had delayed during the Covid-19 pandemic.
“While the entire industry has seen elevated utilization coming out of the pandemic, we have been more acutely impacted than others,” Joyner said. “Our immediate priority remains ensuring stability of the business.”
Also on Wednesday, CVS named a new president for Aetna, effective immediately: Steve Nelson, the former CEO of healthcare giant UnitedHealthcare, a division of UnitedHealth Group. Joyner and Nelson are tasked with convincing investors that CVS can get back on track and better manage the higher-than-expected costs.

Meanwhile, longtime company executive Prem Shah will take on a new, expanded role that oversees the company’s retail pharmacy, pharmacy benefits and health care delivery businesses, CVS said.
Shares of CVS rose nearly 6% in premarket trading Wednesday.
Here’s what CVS reported for the third quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG: 

Earnings per share: $1.09 adjusted vs. $1.51 expected
Revenue: $95.43 billion vs. $92.75 billion expected 

On Oct. 18, when CVS announced Joyner had replaced former CEO Karen Lynch, the company also said it had conducted a strategic review that included layoffs, write-downs and the closure of 271 more retail stores. Those actions were in addition to a plan announced in August to cut $2 billion in expenses over the next several years, which includes cutting nearly 3,000 jobs, or less than 1% of its workforce.
CVS reported sales of $95.43 billion for the third quarter, up 6.3% from the same period a year ago due to growth in its pharmacy business and insurance unit. 
The company posted net income of $71 million, or 7 cents per share, for the third quarter. That compares with net income of $2.27 billion, or $1.75 per share, for the year-earlier period. 
Excluding certain items, such as amortization of intangible assets, restructuring charges and capital losses, adjusted earnings per share were $1.09 for the quarter. That’s consistent with the estimate the company provided last month.
Adjusted and unadjusted earnings also included a charge of 63 cents per share, or $1.1 billion, from so-called “premium deficiency reserves” in its insurance business related to anticipated losses in the fourth quarter of 2024. 
That refers to a liability that an insurer may need to cover if future premiums are not enough to pay for anticipated claims and expenses. Premium deficiency reserves “are effectively an acceleration of future losses, shifting the earnings cadence between” the third quarter and fourth quarter, a spokesperson told CNBC.
CVS expects those premium deficiency reserves “to be substantially released” during the fourth quarter, which will benefit results in that period. The spokesperson said CVS does not expect to book a premium deficiency reserve for 2025.
CVS also recorded restructuring charges of 93 cents per share, or $1.17 billion, in the third quarter. That includes $607 million for additional stores it plans to close in 2025 and $293 million related to layoffs. 

Pressure on insurance unit

CVS’s insurance business booked $33 billion in revenue during the quarter, up more than 25% from the third quarter of 2023. The division reported an adjusted operating loss of $924 million for the third quarter.
The insurance unit’s medical benefit ratio — a measure of total medical expenses paid relative to premiums collected — increased to 95.2% from 85.7% a year earlier. A lower ratio typically indicates that a company collected more in premiums than it paid out in benefits, resulting in higher profitability.
CVS’s health services segment generated $44.13 billion in revenue for the quarter, down nearly 6% compared with the same quarter in 2023. 
That unit includes Caremark, one of the nation’s largest pharmacy benefits managers. Caremark negotiates drug discounts with manufacturers on behalf of insurance plans and creates lists of medications — or formularies — that are covered by insurance and reimburses pharmacies for prescriptions.
CVS’s health services division processed 484.1 million pharmacy claims during the quarter, down from 579.6 million during the year-ago period. 
The company’s pharmacy and consumer wellness division booked $32.42 billion in sales for the third quarter, up more than 12% from the same period a year earlier. That unit dispenses prescriptions in CVS’s more than 9,000 retail pharmacies and provides other pharmacy services, such as vaccinations and diagnostic testing. 
The increase was partly driven by increased prescription volume, CVS said. Pharmacy reimbursement pressure, the launch of new generic drugs and lower front-store volume, including from decreased store count, weighed on the unit’s sales.
In a statement, Joyner said CVS’s share of the retail pharmacy market is at 27.3%, an all-time high. More