Tariff turmoil shakes global auto industry: a technical view
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European equity markets are projected to open lower on Friday, extending the sell-off triggered by U.S. President Donald Trump’s latest salvo of 25% tariffs on auto imports. Futures on the Euro STOXX 50 (FESX1!) are trading roughly 0.5% below Thursday’s close, with implied volatility (based on Euro STOXX 50 options) ticking higher as traders brace for added turbulence. The FTSE 100 futures (Z1!) are down around 0.3%, while peripheral European bond spreads versus German Bunds have widened marginally, reflecting increased risk aversion.
Automakers Under Pressure:
Japan & South Korea: Across Asia, automakers saw heavy selling. Toyota (7203), Honda (7267), and Nissan (7201) collectively lost nearly 3 trillion yen (roughly $20 billion) in market capitalization over three sessions. Average daily trading volume in these stocks also spiked by 20–30% above the monthly average, suggesting institutional exits or short-selling activity tied to tariff developments.
Europe: In pre-market indications, the STOXX Europe 600 Automobiles & Parts Index (.SXAP) is pointing to its sixth consecutive weekly decline, and the RSI for this index now sits below 40, indicating continued bearish momentum. Volkswagen (VOW), operating out of Wolfsburg, has openly cautioned about passing higher import costs on to consumers, further denting near-term demand expectations. Ferrari (RACE) plans to raise some model prices by 10%, illustrating automakers’ shifting strategies to protect margin integrity as new tariff regimes loom.
Shifting Production & Costs: Tariffs force automakers into strategic decisions:
Localizing More Production: Volvo, Audi, and Hyundai (005380) have already announced partial relocations to mitigate tariffs. The viability of such moves depends on local labor cost structures, supply chain resilience, and currency fluctuations.
Absorbing Tariff Costs: Some manufacturers may opt to defend market share by absorbing tariffs, risking margin compression. This approach may temporarily shield sales volumes but weighs heavily on profitability—a factor analysts are incorporating into forward EV/EBITDA valuations for these firms.
Passing Costs to Consumers: As with Ferrari’s price hikes, higher final sticker prices could depress demand elasticity and reduce overall volumes. Analysts are closely monitoring monthly new car registrations in major markets (U.S., EU, China) to detect any early demand erosion.
Tesla (TSLA) in Focus: Texas-based EV maker Tesla remains less exposed to these tariffs because it sources most of its vehicles domestically for the U.S. market. Traders have noted Tesla’s relatively stable implied volatility (IV rank) compared to other auto stocks, reflecting a perception that it is insulated from immediate fallout. However, if reciprocal tariffs penalize certain battery components or raw materials, Tesla’s advantage might wane.
Looking Ahead:
Reciprocal Tariffs: Investors expect an announcement next week from the White House detailing reciprocal measures. The market is uncertain whether Trump’s “lenient” hints will translate into meaningful concessions. A surprising escalation would likely raise equity risk premiums and see EURUSD implied vols climb, particularly for the 1–3 month expiries.
Flight to Safety: Ten-year German Bund yields are approaching new monthly lows, down roughly 8 basis points since the tariff news emerged. Concurrently, the euro has weakened slightly on risk aversion, but strong support around 1.07–1.075 remains intact on technical charts.
Gold Rallies Further: Spot gold has remained well above $3,000 per ounce, up about 17% for the quarter. The daily MACD still indicates bullish momentum, with a minor retracement possible only if risk appetite quickly rebounds. For now, hedge funds appear to be accumulating further positions, as evidenced by rising open interest in gold futures and options.
Key Data Releases on Friday:
French CPI (March): A higher-than-expected print may impact the ECB’s rate outlook, possibly influencing EUR crosses if inflation overshoot persists.
German Labor Statistics (March): Employment figures will be watched for any sign that trade risks are slowing hiring, which could pressure domestic consumption and hamper GDP forecasts.
Eurozone Sentiment Survey (March): A gauge of business and consumer confidence that may hint at how companies are dealing with potential tariff headwinds.
Overall, technical indicators and derivatives markets point to further volatility as automakers grapple with tariffs, shifting production footprints, and the prospect of passing higher costs on to consumers. For now, traders and analysts will stay laser-focused on any shifts in tariff rhetoric, reciprocal measures, and macro data that could alter the risk profile of Europe’s already battered auto sector.
Automakers Under Pressure:
Japan & South Korea: Across Asia, automakers saw heavy selling. Toyota (7203), Honda (7267), and Nissan (7201) collectively lost nearly 3 trillion yen (roughly $20 billion) in market capitalization over three sessions. Average daily trading volume in these stocks also spiked by 20–30% above the monthly average, suggesting institutional exits or short-selling activity tied to tariff developments.
Europe: In pre-market indications, the STOXX Europe 600 Automobiles & Parts Index (.SXAP) is pointing to its sixth consecutive weekly decline, and the RSI for this index now sits below 40, indicating continued bearish momentum. Volkswagen (VOW), operating out of Wolfsburg, has openly cautioned about passing higher import costs on to consumers, further denting near-term demand expectations. Ferrari (RACE) plans to raise some model prices by 10%, illustrating automakers’ shifting strategies to protect margin integrity as new tariff regimes loom.
Shifting Production & Costs: Tariffs force automakers into strategic decisions:
Localizing More Production: Volvo, Audi, and Hyundai (005380) have already announced partial relocations to mitigate tariffs. The viability of such moves depends on local labor cost structures, supply chain resilience, and currency fluctuations.
Absorbing Tariff Costs: Some manufacturers may opt to defend market share by absorbing tariffs, risking margin compression. This approach may temporarily shield sales volumes but weighs heavily on profitability—a factor analysts are incorporating into forward EV/EBITDA valuations for these firms.
Passing Costs to Consumers: As with Ferrari’s price hikes, higher final sticker prices could depress demand elasticity and reduce overall volumes. Analysts are closely monitoring monthly new car registrations in major markets (U.S., EU, China) to detect any early demand erosion.
Tesla (TSLA) in Focus: Texas-based EV maker Tesla remains less exposed to these tariffs because it sources most of its vehicles domestically for the U.S. market. Traders have noted Tesla’s relatively stable implied volatility (IV rank) compared to other auto stocks, reflecting a perception that it is insulated from immediate fallout. However, if reciprocal tariffs penalize certain battery components or raw materials, Tesla’s advantage might wane.
Looking Ahead:
Reciprocal Tariffs: Investors expect an announcement next week from the White House detailing reciprocal measures. The market is uncertain whether Trump’s “lenient” hints will translate into meaningful concessions. A surprising escalation would likely raise equity risk premiums and see EURUSD implied vols climb, particularly for the 1–3 month expiries.
Flight to Safety: Ten-year German Bund yields are approaching new monthly lows, down roughly 8 basis points since the tariff news emerged. Concurrently, the euro has weakened slightly on risk aversion, but strong support around 1.07–1.075 remains intact on technical charts.
Gold Rallies Further: Spot gold has remained well above $3,000 per ounce, up about 17% for the quarter. The daily MACD still indicates bullish momentum, with a minor retracement possible only if risk appetite quickly rebounds. For now, hedge funds appear to be accumulating further positions, as evidenced by rising open interest in gold futures and options.
Key Data Releases on Friday:
French CPI (March): A higher-than-expected print may impact the ECB’s rate outlook, possibly influencing EUR crosses if inflation overshoot persists.
German Labor Statistics (March): Employment figures will be watched for any sign that trade risks are slowing hiring, which could pressure domestic consumption and hamper GDP forecasts.
Eurozone Sentiment Survey (March): A gauge of business and consumer confidence that may hint at how companies are dealing with potential tariff headwinds.
Overall, technical indicators and derivatives markets point to further volatility as automakers grapple with tariffs, shifting production footprints, and the prospect of passing higher costs on to consumers. For now, traders and analysts will stay laser-focused on any shifts in tariff rhetoric, reciprocal measures, and macro data that could alter the risk profile of Europe’s already battered auto sector.