TARIFFS: Another Step Closer To Auto Tariffs, Awaiting Details On Pharma
- US President Trump late yesterday signed a proclamation to implement a 25% tariff on auto imports from Apr 3.
- If implemented, it will first target fully assembled vehicles before widening to include engines, transmissions and powertrain components amongst other key parts (which at least partly corroborates a WSJ report yesterday that the US was weighing excluding auto parts from tariffs).
- Both the focus on autos and proposed rate isn’t new – Trump had threatened auto tariffs of “about 25%” back on Feb 18 – but it demonstrates a greater willingness to push ahead with tariffs on important sectors after some hopes of a paring back in severity.
- Taking this from a European angle, the FT yesterday reported EU’s Sefcovic expecting broad Trump tariffs of about 20% after his visit to Washington on Tuesday.
- Our policy team had earlier reported an EU trade source as saying the EU has offered to cut tariffs on U.S. cars to zero and to build more pharmaceutical factories in the U.S. as it seeks to head off tariffs, or alternatively reduce its auto tariffs to the same level as the 2.5% imposed in the U.S. The same official noted that the “dialogue is still going. The door is not closed” but at the same time, "This will be the final analysis before Trump makes the final decision.”
- Whilst some might see potential for some backtracking ahead of the April 3 date considering these proposed terms (and Trump’s continuing focus on reciprocity), Trump also claimed the tariffs are “permanent” with no intention to make exceptions.
- Trump has also suggested further tariffs would be imposed on the EU and Canada if they worked together "to do economic harm" to the US, presumably provoked by new Canadian PM Carney's first trips being to Europe.
- A reminder that from an EU-wide perspective, it’s the still-threatened pharma tariffs (which have previously been touted at 25% or higher) that could be more impactful still than auto tariffs. EU exports of vehicles to the US were worth 0.3% of EU GDP in 2024 (or 0.2% GDP for net exports considering Trump has focused on trade imbalances) but that was 0.7% and 0.4% GDP respectively for pharmaceutical products.
- The opposite is true for Germany however, with vehicle exports to the US worth 0.8% GDP and net exports 0.6% GDP, exceeding pharma worth 0.6% GDP and 0.5% GDP.
- In either case, a pushing ahead of 25% tariffs on either or both of these sectors is a significant escalation from the 25% tariffs already enacted on steel and aluminium that came into play back on Mar 12 having first been touted Feb 10.
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- SFRM5/U5/Z5 fly paper paid -6.0 on ~2.1K.
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COMMODITIES: Fresh Short-Term Cycle Lows in WTI Futures Reinforces Bearish Theme
A bearish theme in WTI futures remains intact and the move lower last week, and Monday’s fresh short-term cycle low, reinforces a bear condition. Support at $70.20, the Feb 6 low, has been pierced. A clear break of it would strengthen the downtrend and confirm a breach of the 50-day EMA. This would open $67.75, the Dec 20 ‘24 low. Key S/T resistance has been defined at $74.06, Feb 3 high. A move above this level would reinstate a bull theme. A bull cycle in Gold remains in play and the yellow metal continues to trade at its latest highs. Fresh cycle highs once again confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on the $2962.2, a Fibonacci projection. The first key support to watch is $2875.2, the 20-day EMA.
- WTI Crude up $0.12 or +0.17% at $70.84
- Natural Gas up $0.01 or +0.18% at $4.001
- Gold spot down $11.78 or -0.4% at $2940.65
- Copper down $1.2 or -0.26% at $455.1
- Silver down $0.15 or -0.46% at $32.207
- Platinum down $0.48 or -0.05% at $969.5
EQUITIES: Recent Move Lower in E-Mini S&P Considered Corrective For Now
The trend condition in the Eurostoxx 50 futures contract remains up and last week’s climb to a new alltime high on the continuation contract, reinforces a bull theme. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 5574.57 next, a Fibonacci projection. Initial firm support to watch is 5387.59, the 20-day EMA. A pullback would be considered corrective. S&P E-Minis traded lower again, on Monday. The move down appears corrective, however, price has breached support at 6014.00, the Feb 10 low. This signals scope for a deeper retracement and has exposed a key support at 5935.50, the Feb 3 low. Moving average studies remain in a bull-mode condition that suggests the trend direction remains up. A resumption of gains would refocus attention on key resistance at 6178.75, the Dec 6 ‘24 high.
- Japan's NIKKEI closed lower by 539.15 pts or -1.39% at 38237.79 and the TOPIX ended 11.83 pts lower or -0.43% at 2724.7.
- Elsewhere, in China the SHANGHAI closed lower by 26.988 pts or -0.8% at 3346.04 and the HANG SENG ended 307.59 pts lower or -1.32% at 23034.02.
- Across Europe, Germany's DAX trades higher by 38.35 pts or +0.17% at 22463.07, FTSE 100 higher by 31.4 pts or +0.36% at 8689.76, CAC 40 up 8.76 pts or +0.11% at 8097.74 and Euro Stoxx 50 down 0.24 pts or 0% at 5453.06.
- Dow Jones mini down 9 pts or -0.02% at 43523, S&P 500 mini down 7.25 pts or -0.12% at 5993, NASDAQ mini down 62.75 pts or -0.29% at 21354.25.
