US Auto Sector Hit Hard as Tariff Pressures Mount

Market Overview: Tariff Pressures Weigh on Automakers and Investment Banking

Wall Street is showing mild weakness in pre-market trading, with automaker stocks facing heightened pressure. J.P. Morgan downgraded the auto sector in anticipation of 25% tariffs on imported cars and components, which are set to take effect on April 3. HSBC also lowered its price target for Tesla to $130 per share, citing growing headwinds.

Meanwhile, the EU is bracing for further trade tensions, anticipating that Donald Trump will impose 20% tariffs on imports from the region next Wednesday. If implemented, market participants will closely monitor how US trading partners respond.

Adding to the concerns, Jefferies reported a significant miss in its latest earnings, highlighting growing strain on the investment banking sector due to the Trump administration’s trade policies.

Auto Sector Outlook: Rising Costs and Job Losses Ahead

The impact of upcoming tariffs is particularly severe for the US auto industry. J.P. Morgan downgraded automakers and dealership stocks, warning of “draconian” tariffs that introduce material risks to the sector. With imports from Canada and Mexico also subject to increased tariffs from April 3, costs across the US auto industry are projected to soar from $41 billion to $82 billion.

Price Target Adjustments:

• General Motors (GM): Lowered to $53 per share

• Ferrari: Cut to $460 per share

• Ford: Downgraded, with market sentiment suggesting a possible dividend suspension in the near future.

Further complicating the outlook, subsidies for electric vehicle (EV) purchases have been eliminated, increasing the financial burden on consumers. Tariffs on aluminium and steel — and potentially copper — are driving production costs higher across the board.

Job Loss Projections:

• The Peterson Institute estimates that the 25% tariffs could result in the loss of 195,000 US jobs over the next 1 to 3 years.

• The Center for Automotive Research projects a more severe impact, forecasting a net loss of over 400,000 jobs, affecting not only automakers but also repair shops and auto dealerships.

Earnings Review: Weakness in Investment Banking, Mixed Results Elsewhere

Jefferies:

• Earnings fell well short of expectations, reflecting a sharp slowdown in investment banking activity.

• Management warned that ongoing US policies are placing increasing strain on future growth prospects.

MillerKnoll:

• Earnings were in line with expectations, but revenue missed targets.

• The outlook remains weak, raising concerns about the company’s growth trajectory.

Petco:

• Projections for the current quarter and 2025 exceed expectations, offering a positive outlook.

• Despite the favourable outlook, UBS lowered its price target for Petco to $3.25 per share, maintaining a “Neutral” rating.

Economic Insights: Labour Market and GDP Growth Hold Steady

Pre-market economic data shows that initial jobless claims came in at 224,000, aligning closely with expectations of 225,000.Meanwhile, the fourth-quarter GDP growth rate was revised upward to 2.4%, slightly beating Wall Street’s estimate of 2.3%. While this revision provides a snapshot of moderate growth, it does little to offset concerns about future economic uncertainty driven by rising tariffs and weakening business sentiment.

Federal Reserve Watch: Hawkish Signals and Inflation Concerns

At 9:30 PM CET, Thomas Barkin, President of the Richmond Fed, is scheduled to speak, offering potential insights into the Fed’s outlook.Yesterday, the St. Louis Fed President issued a warning that the latest round of tariff increases could fuel inflation both directly and indirectly. He suggested that if inflationary pressures accelerate, the Fed may be forced to adopt a more aggressive monetary stance, potentially leading to additional rate hikes.

In addition, the US Treasury will auction $44 billion in 7-year Treasury bonds today, with results expected at 6:00 PM CET. The outcome of this auction could influence bond yields and broader market sentiment.

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