Investors of all stripes are waiting with bated breath for the Trump Administration’s tariff announcement, expected later today during US trading, that could kick off a storm of disruption for international trade relations and supply chains.
PGIM analysts highlight that the structure of Trump’s proposed reciprocal tariffs remains unclear, particularly whether the response will involve blanket measures or targeted actions against specific countries and industries.
The firm expects any initial measures to focus on the 15% of countries previously identified by the United States administration as accounting for the bulk of US trading volume.
“Those with tariff fatigue,” PGIM wrote, “may find that this week confirms the beginning stages of broad tariff negotiations, rather than marking the end stage of tariff talk.”
Automotive sector a key focus
New tariffs affecting the automotive import sector are due to take effect this week – PGIM estimates that the auto tariffs could effectively increase the cost of a new vehicle by 9-12% with a similar increase for used car prices.
On the other hand, if the manufacture of all 7.6 million units of imported automobiles were to be assembled in the US, it could generate more than 105,000 jobs – if automakers choose to develop production facilities on US shores.
Even so, 40-50% of automobiles assembled domestically in the US today contain imported components, although certain parts including engines and transmissions remain exempt under the USMCA trade agreement, which is under review.
US-based business groups have urged President Trump to halt plans to impose the broad 25% tariff on imported vehicles and parts, arguing it would lead to dramatic price hikes.
"The increased costs would cause significant disruption throughout the supply chain and, perhaps most importantly, lead to significant price increases to the cost to American consumers for vehicles," the Detroit Regional Chamber and MichAuto wrote in a letter.
"In Michigan, where one in five jobs is automotive-related, the pain felt by working-class citizens will be profound."
White House spokesperson Kush Desai responded that automakers like Hyundai have already announced new investments in the US, arguing that those investments coupled with Trump’s call for a new tax deduction on car loan interest "will continue to drive historic manufacturing and job growth."