Tariffs and the uncertainty surrounding the Trump administration's trade policies have gripped the markets and cast a shadow over manufacturers in almost every industry. Cars are core to American culture, where companies like Ford Motor Company (F 2.39%) resonate with consumers and employ thousands of people.
It's unclear how tariffs will impact Ford, which assembles most of its vehicles in the United States but imports many parts and components. Amid these lingering concerns, the stock has slid to 52-week lows. Where might Ford Motor Company be in one year, and is this dip a buying opportunity?
The U.S. against the world and the potential problems for Ford Motor Company
The Trump administration's trade philosophy marks a shift from free trade to a more protectionist approach, with tariffs aimed at narrowing America's trade deficit and restoring the country's industrial footprint.
Ford Motor Company is an iconic American company but a global business. Therefore, tariffs present two problems.
First, tariffs threaten to raise the price of vehicles for U.S. consumers. Ford executives have made media rounds, disclosing that the company assembles approximately 80% of its vehicles in the United States but utilizes a global supply chain, so the parts and components could be vulnerable to tariffs. The company announced it was extending employee pricing on most of its vehicle lineup to help keep prices stable for consumers. That alone is essentially a price cut and could pressure profits.
Second, an ongoing trade war could lead to retaliatory trade policies that hurt Ford's international sales -- roughly half of Ford's 4.47 million units sold in 2024 were to non-U.S. markets, including China (442,000), Canada (269,000), the United Kingdom (242,000), and Germany (155,000), among others. Retaliatory tariffs could raise prices and slow sales, or consumers may buy other brands out of spite.
Even if Ford receives tariff exceptions and increases its market share in America, potential declines in foreign markets could offset that.
Additional pressure on an already challenging business model
Tariffs are the last thing Ford needs. The automotive industry is already tough to begin with. It's competitive domestically and abroad, requires expensive factories and constant financial investment, and is sensitive to the economy because cars and trucks are big-ticket purchases for most customers.
Ford's business ebbs and flows, with profitable years followed by massive losses during recessions or other crises. The company's earnings per share have only increased by roughly 90% since the mid-1980s. As a result, the stock has badly lagged the broader market during that time:
F Total Return Price data by YCharts
Many investors like Ford stock for the dividend, which yields a whopping 6.5% at its current share price. Today, Ford can easily afford it. The dividend is $0.60 per share (paid quarterly), just a third of the company's 2024 earnings. The problem is what may happen if tariffs pressure the business.
Where will Ford be a year from now?
As of now, analysts have dramatically lowered their earnings estimates for 2025 and 2026:
Data by YCharts.
A stock doesn't necessarily become cheaper when the price falls if earnings decline, too. It's hard to forecast Ford's long-term growth trajectory, but it's hard to get excited if earnings decline over the next 24 months. If the business environment is as bad as some fear, management may cut the dividend to conserve cash. Ford has routinely cut its dividend in the past if the economic situation requires it to do so, so investors shouldn't lean too heavily on a backward-looking payout ratio in this market.
Ford has drifted to a price-to-earnings ratio of just under 7 (using 2025 estimates), so I think the valuation appropriately reflects Ford's tariff risks and broader struggles in the automotive industry. The market doesn't have much reason to value the stock higher as long as this global trade war wages on. Therefore, the stock may have limited potential over the next year, barring a complete reversal from the Trump administration's proposed trade policies.
Investors shouldn't rush to buy this dip.
