President Donald Trump’s new auto tariffs, which took effect on Thursday, are weighing on stocks and raising concerns among investors and analysts. The Dow Jones Industrial Average dropped 155.09 points, or 0.37%, to end at 42,299.70, while the S&P 500 declined 0.33% to close at 5,693.31. Shares of several automakers declined after Trump announced tariffs on “all cars that are not made in the United States,” effective April 2.
International automakers saw their shares pull back more than 7%, while others slipped nearly 4%. Tesla, however, added 0.4%, buoyed by its domestic production. Wall Street analysts expressed concerns over the potential impact of Trump’s auto tariffs on the broader U.S. economy.
Trump has long discussed imposing duties on countries with tariffs on U.S. imports and emphasized that these retaliatory tariffs will be permanent throughout his second term. Sameer Samana, Wells Fargo Investment Institute senior global market strategist, said, “I think it’s just the scattershot way that trade policies are being implemented that maybe has investors on edge … just the approach worries folks that something may fall through the cracks.”
The major indexes are clinging to marginal gains this week, with the S&P 500 ticking up 0.5%, the Nasdaq gaining 0.1%, and the Dow adding around 0.8%. In other market news, Bank of America downgraded UBS to underperform from neutral, citing uncertainties over the new regulatory framework in Switzerland.
AppLovin shares tanked more than 14% after short seller Muddy Waters revealed a short position and published a report questioning the company’s practices.
Auto tariffs impact markets and economy
Despite the market turmoil from tariff news, UBS advises investors to stay invested in stocks.
Mark Haefele, Chief Investment Officer for UBS Global Wealth Management, emphasized the importance of diversified portfolios and suggested that a significant drop in the S&P 500 could present a buying opportunity. The new auto tariffs have the potential to significantly impact the American automotive industry and raise the prices of millions of cars sold annually across the country. Cars are fundamental to American life, and the tariffs are expected to push already high prices even higher, affecting affordability for consumers.
The administration is also planning to introduce tariffs on auto part imports, which will raise costs even for cars produced within the United States since many contain imported parts. This could increase the cost of American-made cars by $4,000 to $12,000 or more, according to various analyses. Higher car prices aren’t the only concern; American jobs are also at risk.
Approximately 1 million people work in U.S. factories that assemble cars or produce auto parts, and disruptions to the interconnected North American market could lead to production cuts and potential job losses. President Trump maintains that the tariffs will prompt automakers to increase U.S. production, but automakers are not currently signaling plans for significant investments due to the uncertainty surrounding tariff policies. Overall, the auto tariffs pose substantial risks to both consumers and workers, with extensive implications for car prices and job security in the industry.
Investors will be closely watching the impact of these tariffs on the stock market and the broader U.S. economy in the coming weeks and months.