The U.S. auto industry may be staring down a massive profitability crunch as President-elect Donald Trump‘s proposed 25% tariffs on vehicle imports from Mexico and Canada threaten to squeeze margins by nearly one-fifth, according to S&P Global Ratings.

Michigan-based automakers like General Motors Company GM, Stellantis N.V. STLA, and Ford Motor Co. F could lose up to 17% of their combined annual EBITDA – a financial acronym that stands for earnings before interest, taxes, depreciation, and amortization – in a worst-case scenario. That’s according to a note published Friday by S&P Global analysts including Lukas Paul.

GM, Stellantis Could Lose The Most From US Tariffs On Mexico

The proposed tariffs would be especially painful for GM and Stellantis, which depend heavily on Mexican manufacturing for key models, S&P Global Ratings said.

GM, for example, builds eight vehicle lines in Mexico, including the Silverado and Sierra pickup trucks — some of its most profitable products, the analysts said. Stellantis , meanwhile, relies on its Mexican operations for the Jeep Compass and Ram truck models.

For GM and Stellantis, the percentage of EBITDA at risk would be above 20%,Paul said.

Ford’s exposure to Mexican tariffs is lower given its more modest footprint there, producing three models: the Bronco, Maverick and Mustang Mach-E.

All three automakers could feel the sting of higher costs and disrupted supply chains.

Tariffs “could have an incremental negative effect on the auto industry, which already faces pricing pressure from sluggish demand growth, into 2025,” S&P Global wrote.

The report also downplayed the gains from a “reshoring.” Shifting production from Mexico back to the U.S. is an option, but it would come with high costs, the analysts said.

Labor in the U.S. is significantly more expensive, and automakers would have to untangle deeply integrated supply chains that have been built around Mexican facilities. For GM, which assembles some of its highest-margin vehicles south of the border, this would be particularly burdensome.

Read also: Canada Prepares Retaliatory Tariffs After Trump Threats: Analysts Warn Of Further Loonie Weakness

EV Tax Credits Under Fire

The potential tariffs aren’t the only challenge on the horizon.

Trump has also suggested revisiting the Inflation Reduction Act (IRA), including the possibility of repealing the $7,500 tax credit for qualifying battery electric vehicles and plug-in hybrids.

For automakers like Ford and GM, which are investing heavily in electric vehicles, this could be another blow to their bottom lines.

The IRA credit has been a key incentive driving consumer adoption of electric vehicles, particularly as prices remain high relative to internal combustion engine vehicles.

A rollback could dampen EV sales just as automakers ramp up production in response to rising competition from Tesla Inc. TSLA and Chinese automakers like BYD.

Could Tariffs Raise Risks For Credit Downgrades?

“If the tariffs materialize as outlined, the rating impact would depend on the current rating headroom and the success of mitigation strategies,” S&P Global stated.

Yet, while the proposed tariffs alone are unlikely to trigger credit rating downgrades, they compound an already challenging environment for U.S. automakers.

Sluggish demand, tougher CO2 emissions targets in Europe and growing competition from Chinese automakers are already straining profitability.

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