The Street host Jim Cramer described last week how the impact of President Trump’s proposed tariffs would be felt by American automakers in the case of Ford Motor Company (NYSE: F). He labeled Ford a “ping pong stock” because uncertain trade policy is creating wild price fluctuations in its shares. Investors now do not know whether Ford shares are a good value or a risk.
Tariffs and Their Impact on Ford
Cramer warned the new tariff moves, especially targeting Canadian and Mexican imports, would severely hurt the supply chain for Ford. Given that Ford is relying on automobile assembly within and components from the two countries, increased tariffs would drive up production costs. Those additional costs would subsequently be shifted to buyers as higher prices on Ford cars, potentially cutting back on demand.
A 25% tariff on foreign vehicles and parts would particularly sting. Ford generates about 15% of its U.S. sales from Mexico, and with an average $25,000 price per car, a tariff would add as much as $6,250 to the price. If Ford passes these costs along without raising them at the expense of customers, the profitability of its operation could take a serious hit.
Investor Anxiety and Cramer’s Warning
Jim Cramer on Ford Motor Company shares remains being careful. He urged investors to be cautious before investing in Ford shares, with the tremendous level of uncertainty. The auto manufacturer is already facing difficulties such as slowing world demand and rising material costs. Adding trade instability to the mix only increases the risk further for investors.
Cramer explained how Trump’s economic policies generate market volatility. On one day, there are threats of new tariffs, and the next day, there are reports of negotiations. This volatility makes it difficult for car manufacturers to plan ahead and for investors to make informed investments.
Hedge Fund Interest in Ford Stock
Despite the risk, Ford remains an attractive option for institutional investors. As of Q4 2024, 45 hedge funds held Ford shares, demonstrating consistent confidence in the long-term value of the firm. But individual investors need to be cautious, says Cramer. While hedge funds can navigate short-term fluctuations, individual investors might not be able to stomach the stock’s wild swings.
Ford also yields 6% in dividends, making it an attractive choice for income investors.
More Widespread Auto Industry Issues
The tariff impact does not end with Ford. General Motors (NYSE: GM) is also hurting in the same way. Cramer explained that the entire auto sector is facing higher costs, supply chain disruption, and reduced consumer demand. If tariffs are imposed, the likes of Ford and GM would be compelled to alter their strategies, potentially shifting production to the U.S., which would further increase costs.
Besides, the taxes on other goods, such as luxury liquor, add to the overall economic volatility. Both the companies and consumers remain uncertain about the future cost, and therefore budgeting funds becomes more difficult.
Ford’s Strategy Going Forward
To counter these risks, Ford is attempting several strategies. One is renegotiating with suppliers to reduce costs. Another is ramping up electric vehicle (EV) production, as government incentives for EVs could offset some of the negative impact from tariffs.
Final Thoughts
Jim Cramer on Ford Motor Company stock is saying The firm is facing cost pressure, potential declines in sales, and erratic policy swings.
For the long-term investor, the dividend and brand value of Ford could be sufficient reasons to stick with it. For the short-term trader, however, the volatility of the stock could be too much of an exposure to take on. While the trade situation unfolds, monitoring the reaction of Ford and its financial results will be crucial.
