Jamie Spencer
Markets react to new auto import duties
US stocks slipped on Thursday after President Trump pushed ahead with hefty new tariffs on auto imports, stoking concerns about a potential full-on trade war and global economic harm.
The S&P 500 (^GSPC) fell 0.1%, while the Dow Jones Industrial Average (^DJI) fell 0.3% on the heels of a losing day for the major gauges. The tech-heavy Nasdaq Composite (^IXIC) flipped between positive and negative territory, last down around 0.1%.
Tariff escalation and global tension
Trump on Wednesday signed an executive order placing the 25% tariffs on foreign-made autos, to begin in April, the same week that reciprocal tariffs are set to take effect.
Adding more fuel to fears, Trump said on Thursday that tariffs “far larger than currently planned” will be imposed on Canada and the EU if they work together to “do economic harm” to the US. Both key US trading partners have responded sharply to the new duties.
Impact on automakers and investor sentiment
Automaker stocks in Japan and Europe slumped as Wall Street assessed the potential hit from the new tariffs. Among US car giants, General Motors (GM) fell 6% while Stellantis (STLA) and Ford (F) also slipped. Meanwhile Tesla (TSLA), seen as the least exposed to tariffs among the automakers, rose as much as 6%.
Investors remain worried that the US economy could slide into recession if Trump’s new levies exacerbate sticky inflation and slowing economic growth. The third estimate of fourth quarter gross domestic product (GDP) released Thursday morning showed the US economy grew at an annualized rate of 2.4% in the final quarter of 2024, up from a prior reading of 2.3%. But the fourth quarter feels like a distant memory amid the first months of Trump’s actions.
Eyes on inflation data and Fed response
The latest economic data lays the ground for Friday’s release of February’s Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge.
Fed Chair Jerome Powell recently reassured markets that rising prices from Trump’s tariffs are expected to be “transitory.” But that stance has raised questions, including from St. Louis Fed president Alberto Musalem.
