The uncertainty around tariffs continues to impact the auto industry even as reports surface that OEMs may avoid some of the large tariffs proposed by the Trump administration.
The stock market was buoyed on Monday in part because news reports over the weekend suggesting that the administration may exclude some auto industry tariffs as part of the reciprocal levies that have been suggested would start on April 2. Reports in Bloomberg News and the Wall Street Journal suggested tariffs may be delayed or excluded on certain industrial sectors next week. That day has been labeled “Liberation Day” by Trump.
On Monday Trump hinted that not all levies he has proposed would be imposed. Additionally, some countries may get breaks, without clarifying. He also mentioned that countries that buy gas or oil from Venezuela may face an additional 25 percent tariff, according to Reuters.
The immediate reaction from investors was a positive one, adding to the belief that tariffs are being used as a negotiating tool, and that the administration is willing to be flexible. Still, a White House official quoted by Reuters said that the president’s support of tariffs remains strong.
“The president is determined to implement reciprocal tariffs that are very strong. People should expect that,” the official said, according to Reuters.
Kelley Blue Book (KBB) on Tuesday reported that while Trump has made tariffs the centerpiece of his economic strategy, the inclusion of four separate sets of tariffs is hurting the industry. “The White House has sent contradictory messages on what’s likely to happen next week. That may be part of a strategy to extract concessions from trade partners,” KBB reported on Tuesday.
The sets of tariff sets include steel and aluminum, most goods imported from Canada and Mexico, auto industry specific tariffs and reciprocal tariffs on existing trade partners, according to KBB. “The president’s barrage marked the latest example of his erratic approach to trade policy, which has frazzled investors and foreign governments,” according to Bloomberg on Sunday.
Sam Fiorani, Vice President of Global Vehicle Forecasting for automotive database supplier AutoForecast Solutions agrees that the tariff talk, even those paused for the auto industry, is hurting it as a whole. The administration’s recent comments at the start of this week suggested that the Canadian and Mexican tariffs within the sector, at minimum will be delayed again.
“If they are delayed it hurts the industry, it doesn’t help it,” Fiorani said. “It seems like there needs to be a win for the Trump administration at some point with (news about) more jobs coming to the U.S.”
The effort to extract concessions from other countries and multi-national companies has yielded some results. South Korea’s Hyundai Motor Group on Monday announced a $20 billion investment in the U.S., including $5 billion for a steel plant in Louisiana, according to CNN and other news outlets. Soon multiple outlets from Automotive News to The Street reported that the deal could help Hyundai avoid tariffs.
Despite the Hyundai news, Fiorani says that the continued uncertainty around tariffs prevents auto OEMs and suppliers from making most new investments and growth plans official. In the meantime, that uncertainty will likely hurt auto stocks.
“They have to wait until the right time within the news cycle to make such an announcement,” Fiorani said. “The goals (of auto companies) is to get clarity on where the market is pointed. Uncertainty does not help you run a business.”
Most of the strategic decisions made by OEMs and suppliers deal with billions of dollars and year of planning, he added. The end result may be lower or delayed profits.
With the tariff news changing on a weekly — if not daily — basis, Fiorani admits it is hard to keep up with all the news. “My mind is spinning right now talking about this (issue),” he said.
