Investors react as Trump auto tariffs rattle markets

(Reuters) -Automaker stocks around the world slumped on Thursday after the latest round of U.S. tariffs were targeted at the sector.

U.S. President Donald Trump said late on Wednesday the United States will effectively charge a 25% tariff on all cars not made in the country and that the new duties on cars and light trucks imported into the United States will be permanent.

Volkswagen, BMW, Mercedes-Benz, Porsche and Continental lost 4.5 billion euros ($4.84 billion) in combined market value on Thursday.

HOWARD WOODWARD, BOND PORTFOLIO MANAGER, T. ROWE PRICE, LONDON:

"While the market was somewhat prepared for additional tariffs, the timing and magnitude were unexpected. This exacerbates already weak European consumer sentiment for high-ticket cars. We anticipate European auto margins will remain under pressure throughout this year and likely into 2026.

"Not all European auto bonds will be equally affected. German manufacturers, with their significant reliance on U.S. exports, are expected to face more scrutiny from traders. Conversely, companies with less exposure to the U.S. market may present investment opportunities. We foresee increased divergence in the performance of individual European auto bonds."

MORITZ KRONENBERGER, PORTFOLIO MANAGER, UNION INVESTMENT, FRANKFURT:

"The announced tariffs on vehicles imported to the USA are a disaster for the entire sector. The belief that prices could be passed on and would be unconditionally accepted by consumers is naive."

"Car prices in the USA will rise - only cars manufactured in the USA can be kept somewhat stable - but the entire supply chain will be affected by the tariff disruption.

"Ultimately, this will lead to declining volumes of new cars, inefficiencies in factory utilization, and significantly lower margins, free cash flows, and ultimately earnings."

KYLE RODDA, SENIOR FINANCIAL MARKET ANALYST, CAPITAL.COM, MELBOURNE:

"There are a lot of layers here. However, I think the big concern is that not only will these tariffs be disruptive and economically harmful, but it indicates that the Trump administration's shake-up of global trade won't necessarily end with next week's April 2nd announcement of reciprocal tariffs, as previously hoped. This potentially drags out trade uncertainty even longer and raises the question of how radical a change to the global trade order is Trump trying to bring about."

JASON CHAN, SENIOR INVESTMENT STRATEGIST, BANK OF EAST ASIA, HONG KONG:

"Trump's auto tariff probably has a bigger impact on the EU compared with Chinese carmakers. The levies on Chinese autos have been hiked up already, and they have relatively limited exposure to the U.S. market anyway. Also, his comments about the TikTok deal are giving people hope that there's room for negotiations.

"It now looks like he's more aggressive toward other markets instead of focusing all his efforts on China, so that could somehow help cushion the sentiment for China and Hong Kong."

SHANE OLIVER, CHIEF ECONOMIST AT AMP, SYDNEY

"It is sort of anticipated. It is just a question of the timing... so maybe the market has sort of factored it in. The other aspect is investors assume he may backtrack a little bit, maybe that's why the market has become a little less responsive.

"With sentiment being so much more negative now, it's hard for negative news to have a big impact than it was several months ago."

VASU MENON, MANAGING DIRECTOR, INVESTMENT STRATEGY, OCBC, SINGAPORE:

"The auto tariffs represent a significant expansion of Trump’s trade war. It also risks disrupting operations for U.S. automakers, which are highly integrated to supply chains in Mexico and Canada.

"Trump’s latest actions will probably make cars more expensive for U.S. consumers already worried about inflation and could amplify recession worries. The tariffs may not only raise the prices of foreign-made cars in the U.S., even U.S.-made cars could see price increases if supplies and parts are affected by the levies.

"Retaliation from countries that have been affected by the latest auto tariffs could worsen the situation for U.S. consumers and automakers and fuel further concerns about inflation and the outlook for the U.S. economy."

CHUCK CARLSON, CHIEF EXECUTIVE OFFICER, HORIZON INVESTMENT SERVICES, HAMMOND, INDIANA:

    "I've been kind of suspect on all the tariff talks in terms of what is going to last, what is a negotiation, what is going to be pulled at the last minute. My initial reaction was this tariff might have some legs."

    "There's probably going to be some exemptions or modifications for some of the U.S. automakers... I could see the U.S. automakers getting some exemptions based on their supply chains. But I think he may want to see how this works out as opposed to stopping it in two or three days. That's my initial reaction, that this particular tariff might have legs in terms of its longevity."

PRASHANT NEWNAHA, SENIOR ASIA-PACIFIC RATES STRATEGIST, TD SECURITIES, SINGAPORE:

"These auto tariffs are likely on top of other tariffs on steel, aluminum, copper and the impending reciprocal tariffs to be announced on 2nd April. It's hard not to interpret this as anything but a cue for higher prices and lower growth with a soft landing becoming more complicated. Countries most exposed to the new auto tariffs are Slovakia, Mexico, South Korea and Japan. Keep an eye on stocks of car makers, the Korean won and Mexican peso."

(Reporting by the Global Finance & Markets Breaking News team; Compiled by Vidya Ranganathan and Alun John; Editing by Jamie Freed, Lincoln Feast and Dhara Ranasinghe)