US President Donald Trump has signalled plans to impose a 25% tariff on automobile imports, together with related or increased levies on pharmaceutical merchandise and semiconductor chips.
US President Donald Trump stated he could impose a 25% tariff on auto, pharmaceutical, and semiconductor imports as quickly as 2 April. He indicated that firms can be given time to relocate their manufacturing vegetation to the US earlier than new levies are introduced.
Trump’s widening tariff threats
The announcement marks the most recent escalation in Trump’s tariff plans, additional heightening the danger of a commerce warfare between the US and its world buying and selling companions. Final week, the president signed an govt order to analyze commerce relations with the intention of introducing reciprocal tariffs, anticipated to take impact as early as 1 April. Beforehand, he introduced 25% tariffs on metal and aluminium, probably ranging from 4 March.
These import duties will significantly influence the US’s largest buying and selling companions – Mexico and Canada. As soon as carried out, each nations will face compound tariffs throughout the three sectors, as Trump has paused blanket 25% levies which will take impact in March. He has additionally imposed a ten% tariff on China this month, prompting retaliatory measures from Beijing.
Talking to reporters at his Mar-a-Lago membership on Tuesday, Trump confirmed that auto tariffs can be set at 25%. Levies on pharmaceutical merchandise and pc chips may very well be even increased. “It will be 25% and better, and it will go very considerably increased over the course of a yr,” he stated when requested about potential tariff prices for the 2 sectors.
Trump has used tariff threats as leverage to rebalance US commerce relations, aiming to scale back the commerce deficit and produce manufacturing again to the nation. His proposed tariffs are prone to take impact in April, permitting time for negotiations.
Potential influence on the EU
Vehicles and pharmaceutical merchandise are two of the European Union’s (EU) main exports to the US. Based on the US Census Bureau, the US imported $127bn (€121.4bn) price of pharmaceutical merchandise in 2024. A good portion of those imports got here from the EU, significantly GLP-1 weight-loss medication, the place Novo Nordisk’s Wegovy holds a considerable market share.
Novo Nordisk’s shares have fallen 6% this yr, following sluggish earnings outcomes and rising issues over competitors from US rival Eli Lilly. The healthcare sector has additionally been one of many worst-performing sectors within the Pan-European Stoxx 600 over the previous 5 buying and selling days.
European automobile makers might additionally face mounting challenges if Trump imposes compound import levies on items from Mexico and Canada. Main producers equivalent to Volkswagen and Stellantis have manufacturing vegetation in each nations. Nonetheless, regardless of the tariff risk, European auto shares have been rallying this yr as a result of delays in motion from the US president.
In response to Trump’s tariff threats, significantly on automobile imports, the European Union stated in a press release on Tuesday: “No particular provide on decreasing tariffs has been made by both aspect. Any tariff reductions should be mutually useful and negotiated inside a good and rules-based framework. The EU stays dedicated to deepening transatlantic commerce relations and addressing tariff issues via constructive dialogue.”
European markets rally could pause
Regardless of Trump’s widening tariff threats, European inventory markets have carried out strongly this yr. The latest surge in protection shares has repeatedly pushed benchmarks such because the DAX and the Euro Stoxx 600 to new highs. Nonetheless, the rally might take a breather as rising European authorities bond yields threaten to place strain on fairness markets.
Along with US-EU commerce tensions, the upcoming German election is anticipated to weigh on investor sentiment.
“…Markets are pricing in a deterioration in US-EU relations, a threat premium tied to Sunday’s German elections, and the potential for increased insurance coverage prices as European nations search to finance a pointy enhance in defence spending,” wrote Michael Browns, senior analysis strategist at Pepperstone in London, in a observe.