Tariff deja vu

We promise we’re not just talking about tariffs again because we’ve run out of other ideas.

President Trump dropped another T-bomb yesterday, telling reporters that he plans to broaden tariffs on a whole new range of imports, including automobiles, semiconductors, and pharmaceuticals.

Trump warned that the levies, which he said could be implemented as soon as April 2, could start at 25% but could go “substantially higher over the course of a year.”

Markets sank in reaction, given that the threat of an all-out trade war seems likelier every day.

Trump’s ongoing tariff bonanza has roiled markets and caused business leaders to hit back hard with strongly worded-yet-vague statements of disapproval. A quick reminder: Trump previously threatened to slap Canada, Mexico, and Colombia with steep tariffs before reversing course. A 10% tariff on some Chinese goods was implemented earlier this month, and an additional 25% tariff on steel and aluminum were announced last week and are expected to be implemented in March.

Trump also promised last week that he would hit countries with retaliatory tariffs for any levies they put on US exports.

An uphill road

If and when this new series of tariffs goes into effect, analysts expect that the auto industry will be hit particularly hard given that the it relies heavily on foreign exports. The 8 million vehicles imported last year made up roughly half of all US vehicle sales, according to Bloomberg.

Auto stocks immediately reacted to the news. European auto conglomerate Stellantis, which imports about 45% of the cars it sells into the US, declined 2.15%. General Motors manufactures vehicle parts in Mexico and Canada, which means that roughly 45% of its sales in the US are imports. Shares fell 0.69%.

Volkswagen could be hit particularly hard, considering 80% of the company’s sales come from cars sold in the US. Shares dropped 3.23% today.

On the other hand, Ford could fare far better than its competitors, since it only imports about 20% of its cars, while Tesla produces its EVs domestically. Tesla rose 1.82% today, while Ford climbed 0.48%.

Mexico, Japan, and Canada are the nations with the biggest auto exports, although Trump did not specify whether the latest tariffs would apply to all countries across the board. And while autos were in the spotlight today, Malaysia and Singapore are major chipmaker markets that export heavily to the US and could feel some serious pain.

But as you already know if you’ve been following the trade war thus far, a lot of Trump’s proposals have turned out to be more like bargaining chips than actual policy. Only time will tell if today’s latest tariff-induced market moves will actually reflect new economic policy.—LB