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Shares of carmakers fell on Tuesday as investors were unsettled by Donald Trump’s pledge to impose tariffs on imports from neighbouring trade partners and China, but broader equity markets largely shrugged off the move.
The S&P 500 was up 0.3 per cent in afternoon trade, while the technology-heavy Nasdaq rose 0.5 per cent. Europe’s Stoxx 600 closed 0.6 per cent lower.
Auto stocks fell in response to Trump’s plans for an additional 10 per cent tariff on goods from China as well as a 25 per cent levy on “all products” from Mexico and Canada, which he outlined in a post on his social media site Truth Social late on Monday.
Many car companies have factories in Mexico serving the US market. General Motors fell as much as 8.5 per cent, while Japan’s Nissan lost 4 per cent. In Europe, Stellantis and Daimler Truck were down 5 and 6 per cent, respectively.
The relatively muted reaction outside the auto sector reflects investors’ belief that Trump’s statements were a “gambit for negotiations”, according to Mohit Kumar, chief economist at Jefferies.
“Eventually, tariffs might end up lower than the numbers that have been floated,” he said.
The Mexican peso suffered a 2.5 per cent drop against the US dollar, while the Canadian was down 0.7 per cent having earlier on Tuesday hit a four-year low.
US Treasury yields climbed 0.04 percentage points to 4.30 per cent, reversing part of Monday’s decline that came after investors welcomed the nomination of hedge fund manager Scott Bessent as Treasury secretary — seen by many as a sign that Trump’s policies may be moderated.
In Japan, the export-heavy Topix closed down 1 per cent, while Taiwan’s Taiex finished the day 1.2 per cent weaker.
Chinese stocks largely shrugged off the news, falling 0.2 per cent, while the renminbi dropped 0.2 per cent against the dollar, with the proposed tariffs on Chinese imports lower than some investors had feared.
There was an element of “relief” in Chinese markets over the announcement, said Brian Arcese, a portfolio manager at Foord Asset Management in Singapore.
“[It] is largely a function of the tariff proposal being 10 per cent and not 60 per cent . . . though we wouldn’t be surprised to see these numbers change over time,” he said.
Economists at Standard Chartered estimated that a 1 percentage point increase in US tariffs on China resulted in a 1.5 percentage point decline in Chinese exports to the US during Trump’s first term as president.
On Monday, “the market narrative was that the nomination of Scott Bessent [was of] someone who understood the market and could reduce the more extreme policy scenarios”, said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.
“But by including Canada and Mexico on day one, it may open the door to faster tariffs on other trading partners,” he added.
Additional reporting by Ian Smith in London
Source: Economy - ft.com
