Update Equities: Trump tariffs intensify trade war
President Donald Trump signed a proclamation to implement a 25% tariff on auto imports, effective 3 April, initially targeting fully assembled vehicles, with an expansion to include major auto parts by 3 May.
He also suggested imposing tariffs on the EU and Canada if they harmed the US economically. He threatened levies on lumber, semiconductors and pharmaceutical products.
These tariffs are expected to increase the prices of foreign and possibly US-made cars due to affected supplies and disrupted supply chains from lower cost countries. This move has deepened tensions with key trading partners, leading to declines in the share prices of major automakers, such as General Motors, Ford, and Stellantis, as well as Asian carmakers, such as Toyota. The EU, Canada, Japan and South Korea criticized the tariffs and hinted at possible countermeasures. Trump's actions, marked by delays and suspensions, have unsettled markets and business leaders, with analysts estimating significant price increases for new cars.
European stocks fell due to the harsh tariffs imposed by the US on automakers and the threat of further trade levies, raising concerns about global economic growth, with investors linking tariffs to higher recession risks. The EU is preparing to retaliate with its own tariffs. The US dollar fell against most currencies, while gold rose towards its record high on safe-haven demand.
Other news this week is that Microsoft has canceled or deferred US and European data center projects totaling about 2 gigawatts of electricity due to an oversupply of artificial intelligence (AI) computing clusters. Nvidia faced further setbacks as reports emerged that China is introducing energy efficiency rules that could restrict the sale of its advanced H20 processors. Shell announced plans to boost investor returns by expanding liquified natural gas sales, while Boeing secured a contract to design the next generation of US stealth fighter jets, beating out Lockheed Martin. Bayer faced a legal setback with a hefty penalty over its Roundup weedkiller. In a bid to secure China's support for a sale of TikTok's US operations, President Trump hinted at potentially lowering tariffs imposed on China.
Germany's legislative approval of EUR 500 billion in debt-financed defence and infrastructure spending marks a critical development, alongside the ReArm Europe plan, now Readiness 2030, which proposes EUR 800 billion for defense and related sectors. These initiatives, primarily benefiting European companies, suggest that European equities might attract more investor interest, as indicated by many brokers last week.