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Morning Bid: Auto tariffs jump the gun

Traders work on the floor of the NYSE in New York · Reuters

Reuters
Thu, Mar 27, 2025, 6:53 AM 9 min read

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LONDON – What matters in U.S. and global markets today

Donald Trump’s 25% auto tariff announcement late on Wednesday ripped across world stock markets overnight, but Wall Street futures held the line ahead of today’s bell as investors questioned just how much more tariff pain is coming next week.

Today’s Market Minute

• Global auto stocks tumbled on Thursday after U.S. President Donald Trump unveiled a 25% tariff on imported vehicles, expanding a global trade war and testing already strained ties with allies.
• Trump said on Wednesday he would be willing to reduce tariffs on China to get a deal done with TikTok’s Chinese parent ByteDance to sell the short video app used by 170 million Americans.
• France’s public sector budget deficit widened last year but not quite as much as the government had expected, official data showed on Thursday.
• Norway’s central bank kept interest rates on hold at a 17-year high of 4.50% on Thursday, in line with most forecasts, as an unexpected resurgence of inflation led policymakers to postpone their previously stated plan for a cut.
• A court order blocking Trump’s freeze on trillions of dollars in government financial assistance will remain in place for now, a federal appeals court said on Wednesday.

Auto tariffs jump the gun

U.S. President Donald Trump jumped the gun on the April 2 “reciprocal” tariff plan, announcing a 25% import levy on all autos and auto parts not made in the United States. He said another wave of tariff announcements was due next week, adding that these would be “very lenient”, but that is likely only relative to the tariffs other countries charge on U.S. exports. That leaves markets with another week to guess what’s next. But the auto sector announcement has predictably caused auto and transport stocks to tumble around the world on Thursday, including a 6% after-hours drop in General Motors and a 3% drop in Ford. Counter-threats of retaliatory tariffs have also streamed in, upping the risk of a full-blown trade war. The U.S. imported $474 billion worth of automotive products in 2024, including passenger cars worth $220 billion. Mexico, Japan, South Korea, Canada and Germany, all close U.S. allies, were the biggest suppliers. Japanese and European stock indexes retreated 0.6% each, the latter hitting two week lows.

Chinese stocks bucked the trend, aided by Trump’s suggestion that he would be willing to reduce tariffs on China to get a deal done with TikTok’s Chinese parent ByteDance to sell the short video app. Chinese markets were also boosted by a rally in vehicle giant BYD after it said it would assemble more cars in destination countries. S&P 500 futures were steady ahead of Thursday’s bell, despite a bruising trading session on Wednesday. But the index’s failure to hold gains back above its 200-day moving average this week has been seen as a worrying sign for trend followers.

In currency markets, the dollar retreated after an initial burst to a three-week high, with the euro rallying after euro zone data showed credit growth accelerating last month. The dollar was slightly firmer against Japan’s yen, Canada’s dollar and Mexico’s peso. China’s yuan and British sterling inched up, with UK gilt yields climbing to two-month highs following Wednesday’s release of the latest government budget forecasts and plans. Long-term U.S. Treasury yields climbed to their highest in a month, with the gap between 2- and 10-year yields reaching its widest since mid-January. While the potentially inflationary impact of tariff rises is the central concern, the Congressional Budget Office also warned that the U.S. government will probably risk defaulting on some of its $36.6 trillion in debt as soon as August – or possibly even by late May – unless Congress acts to raise the nation’s debt ceiling.

High-water mark for scary U.S. investment deficit?

One of the scariest numbers in world finance got even more frightening at the end of last year as America’s skyrocketing investment deficit hit new highs. Whether it’s now peaked is perhaps the most important question facing global markets today. The main thrust of Trump’s global economic policies is clearly directed toward the U.S.’s yawning trade deficit, as he seeks to stop “freeloading” foreign countries from undercutting U.S.