Global Equities Investors Gird for Trump’s Next Tariff Body Blow

(Bloomberg) — President Donald Trump says he’s looking forward to April 2. Global equities investors, not so much.

The administration is expected to unveil a broad slate of so-called reciprocal tariffs against US trading partners on Wednesday, and it’s looming as the next potential body blow for markets. 

The president has said the levies will be “lenient,” but money managers are on guard given the lack of specifics around what the next package of tariffs may include. In a hint of the potential volatility ahead, last week’s announcement of auto tariffs rattled shares in the industry worldwide.

Depending on the scale of what’s announced, Bloomberg Economics sees scope for a hit to US GDP and a jolt to prices over the coming years, given the possibility of massive tariff hikes on imports from some countries. A Goldman Sachs Group Inc. index of stocks that thrive during stagflation — a time of low growth and high inflation — has been soaring. 

“Everything is at stake, everything,” said Mark Malek, chief investment officer at Siebert. “Inflation is on the rise, consumption is showing signs of weakness, consumer sentiment is slipping, all stemming from the administration’s tariff policy.”

April 2 should set the tone for the next few months in markets, Barclays Plc strategists said last week. A wide-ranging set of steep tariffs bodes poorly for risk assets as the second quarter gets underway, they wrote in a report. But with big enough exemptions or a delay, investors should get ready for “a relief rally.”

There’s also the threat of retaliation from US trading partners that boosts volatility, said Solita Marcelli, chief investment officer at UBS’s American wealth management arm. 

In preparation for it all, traders have been exiting segments that may get caught in the crosshairs. Baskets that follow shares most at risk have plunged this year, significantly trailing broader indexes in the US and Europe.

Following is a breakdown of sectors and stocks to watch by region:

The auto industry — including carmakers, parts suppliers and dealers — remains at the center of the tariff-related turmoil, especially after the 25% levies announced last week. General Motors Co. is expected to face sharply higher costs, and while Ford Motor Co. produces a larger share of its US sales domestically than its Detroit peers, it won’t be spared. An index of automakers and components has sunk 34% since Trump took office.

Reciprocal tariffs could add to the pain for autos. There could also be sectoral tariffs on semiconductor chips, drugs and lumber. Chipmakers, which like car companies have a global supply network, are vulnerable at a time when the sector is already struggling with signs of trouble with data-center growth and the pace of capital expenditure. Shares such as Nvidia Corp., Advanced Micro Devices Inc. and Intel Corp. will be in focus.

Pharmaceutical giants such as Pfizer Inc., Johnson & Johnson, Merck & Co. and Bristol Myers Squibb will be exposed as any reciprocal tariffs may impact everything from drug sourcing to distribution.  

Last week, reports said US tariffs on copper imports could be coming within several weeks. The price of copper has soared recently. Even if these levies aren’t unveiled on April 2, this group overall can be volatile, including copper miners, as well as steel and aluminum companies. Stocks to watch include Freeport-McMoRan Inc. and Southern Copper Corp.

The Trump administration plans to almost double duties on Canadian softwood lumber to 27%, with the possibility of additional levies. If any tariffs announced on April 2 impact this group, stocks such as Weyerhaeuser Co. can be volatile. 

Other sectors that may be caught in the fray include industrial manufacturers and consumer companies with suppliers worldwide. Some names that often are used as a proxy for such trade tensions and economic angst include Caterpillar Inc., Boeing Co., Walmart Inc. and Deere & Co.

The European Union is identifying potential concessions to get some levies removed, although officials from the bloc were told that there was no way to avoid new US auto and reciprocal tariffs expected this week. 

The region’s car stocks have been seeing an impact, with the Stoxx Auto & Parts Index down about 12% from this year’s peak. 

German carmakers are in focus as they send more vehicles to the US than to any other country, including some higher-margin models from Porsche AG and Mercedes-Benz Group AG. The auto levies could erase about 30% of those companies’ projected 2026 operating earnings, Bloomberg Intelligence estimates. Manufacturers may boost prices — Ferrari NV plans to do so for some models — or shift more production to the US.

Trump’s threat of a 200% tariff on alcoholic products shipped from the EU is already a headache for the region’s producers of wines and spirits. Aperol maker Davide Campari-Milano NV has said that even a 25% tariff would result in losses of at least €50 million ($54 million).

European miners, especially aluminum and steel producers, have been in focus amid Trump’s 25% tariffs on the metals. Following Europe’s countermeasures, eyes now are on whether the US president will respond. Among companies to watch, Rio Tinto Group, with dual listings in Australia and London, is the biggest supplier of aluminum to the US market, with about half of production manufactured last year in Canada.

As one of Europe’s largest listed companies, the fortunes of weight-loss drug maker Novo Nordisk A/S have big implications for the region’s stock market. That’s why threats of a 25% levy on the EU, with pharmaceuticals as an industry of focus, are aconcern. The maker of Ozempic and Wegovy has said it isn’t “immune” to tariffs. 

Despite China’s massive trade surplus with the US, the nation’s companies are less vulnerable to tariffs than during Trump’s first term. That’s because China’s share of US goods imports dropped almost 8 percentage points from 2017 to 2023, according to data from US Census Bureau.

Still there are some stocks worth watching. In Hong Kong, shares of power-tool maker Techtronic Industries Co., for which the US is a top market, according to BI — have dropped about 8% since Trump’s inauguration due to tariff threats. 

Japan’s carmakers, household names in the US, may see their stocks come under pressure on April 2 if any reciprocal tariffs are seen worsening the outlook for this group. Automobiles and auto parts are Japan’s biggest export products to the US. Stocks to watch include Toyota Motor Corp., the world’s largest carmaker by delivery; and Honda Motor Co., which gets more than half its revenue from North America.

The world’s chipmaking powerhouses — South Korea and Taiwan — will be in focus, with all eyes on Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. TSMC — nearly 70% of whose revenue comes from the US — plans to invest an additional $100 billion in US plants, on top of a previous $65 billion commitment. For South Korea, Trump’s 25% auto tariffs weigh on carmakers and their suppliers, including Hyundai Motor Co. and Kia Corp.

In Southeast Asia, Thailand stands out as a potential major casualty, with its substantial dependence on agriculture and transportation. 

–With assistance from Matthew Griffin.

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