President Donald Trump announced Thursday that the U.S. will set tariffs of 25 percent for steel and 10 percent for aluminum, and impose them as early as this week. The S&P 500 ended the week 2 percent lower, with materials and industrials stocks the worst performers. Stocks were lower Monday.
"Steel is the primary material used by Automobile manufacturers Ford (F) and General Motors (GM)," David Kostin, chief U.S. equity strategist at Goldman Sachs, and a team of analysts said in a Friday report.
"Based on 2017 production mix, if the proposed tariff of 25% on imported steel translates into a similar magnitude of increase in steel prices, it would impact each firm by roughly $1 billion, representing 12% and 7% of their 2017 adjusted operating income, respectively," Kostin said.
Last week, shares of Ford and GM lost 2.8 percent and 8.5 percent, respectively. Both stocks fell Monday morning.
Higher steel and aluminum prices would also reduce profit margins for machinery manufacturers.
"Our analysts believe strength of distribution and branding will be a key differentiating factor," the report said.
Another concern from the tariffs is retaliation by U.S. trading partners, which would hurt companies more reliant on overseas revenue, the Goldman report said. The analysts noted underperformance last week in stocks with high non-U.S. sales such as Expeditors International, 3M and Boeing.
Boeing fell about 1.5 percent Monday morning, while Caterpillar declined about 1 percent.
In July, Goldman's chief global equity strategist, Peter Oppenheimer, recommended investors buy domestic-oriented stocks in the event of a trade war. That report highlighted seven stocks with 95 to 100 percent U.S. sales, including CSX, CVS and Dollar General.
— CNBC's Tae Kim contributed to this report.