Asia Stocks Slide, Gold Hits Record High on US Tariffs

The global market is in turmoil as US President Donald Trump's newly announced 25% tariffs on imported cars and auto parts send shockwaves through the automotive industry and beyond. The tariffs, set to take effect on April 2, 2025, have sparked a wave of uncertainty and fear, driving investors to seek safe-haven assets like gold while stocks plummet.



The immediate impact has been felt most acutely in Asia, where stocks have slid sharply. Japan's Nikkei 225 is set to fall, with futures contracts indicating a significant drop. The country's revised GDP for the fourth quarter came in at 2.2% on an annualized basis, below economists' expectations and the previous estimate of 2.8% growth. This economic slowdown, coupled with the uncertainty surrounding the tariffs, has sent investors fleeing to the safety of gold.

Gold has hit a new all-time high, climbing 1.2% to $3,057.12 an ounce as of 11:17 a.m. ET (1517 GMT) after hitting an all-time high of $3059.30. The precious metal's rally is driven by safe-haven buying, as investors seek protection from the escalating trade tensions and tumbling equity markets. "Looks like we're going to see (gold futures hit) $3100 here shortly and the main catalyst is safe-haven buying," driven by uncertainty around Trump's tariff plans, said Bob Haberkorn, senior market strategist at RJO Futures.

The tariffs are expected to have significant impacts on the global supply chain and production strategies of major automakers, particularly those with extensive operations in Asia. For instance, Mexico is the top foreign supplier of cars to the US, followed by South Korea, Japan, Canada, and Germany. The tariffs will increase the cost of importing these parts, leading to higher production costs and potentially higher prices for consumers. Goldman Sachs estimated that the 25% duties could drive up sticker prices by anywhere from $5,000 to $15,000 per imported vehicle and by $3,000 to $8,000 for domestically made ones.

General Motors (GM) is particularly vulnerable due to its extensive operations in Mexico and Canada. GM shares fell more than 7% on Thursday, reflecting investor concerns about the company's exposure to the tariffs. GM produces vehicles like the Chevy Silverado, Chevy Equinox, and GMC Terrain in Mexico, which will be directly affected by the new tariffs.

The tariffs have also sparked concerns about retaliatory measures from other countries, which could further disrupt the global supply chain. For example, European stocks took a beating on Thursday, erasing billions of euros in gains for the year and hitting shares of the continent's automakers especially hard. Germany's economic affairs Minister Robert Habeck remarked ominously on Thursday, "It needs to be clear that we will not take this lying down."

The likelihood of retaliatory measures from affected countries is high. For example, European stocks took a beating on Thursday, erasing billions of euros in gains for the year and hitting shares of the continent's automakers especially hard. Germany's economic affairs Minister Robert Habeck remarked ominously on Thursday, "It needs to be clear that we will not take this lying down." Retaliatory tariffs could lead to a trade war, which would have negative implications for both the US and its trading partners.

The escalating trade tensions could lead to an economic slowdown. As noted by Reuters, "Investor concerns about the potential economic slowdown were exacerbated after U.S. President Donald Trump in a Fox News interview talked about a 'period of transition' while declining to predict whether his tariffs would result in a U.S. recession." This uncertainty could lead to a decrease in investment and consumer spending, further slowing down the economy.

The automotive industry is not the only one that will be affected. The tariffs on steel and aluminum imports are already in effect, raising the price of aluminum and steel, even when those metals are produced at US mills. This could lead to increased costs for industries that rely on these metals, such as construction and manufacturing.

The escalating trade tensions have already had an impact on stock markets. For instance, Asian stocks fell sharply on Tuesday as a market selloff extended on mounting worries that a wide-ranging trade war could dent U.S. economic growth and lead to a recession. This could lead to a decrease in investment and consumer spending, further slowing down the economy.



Tesla, the electric vehicle manufacturer led by close Trump administration adviser Elon Musk, is likely to fare better than others. Trump's latest move, set to take effect on April 2, is part of a broader global trade war launched as one of the opening acts of his second term. When announcing the new tariffs on Wednesday, he said: "What we're going to be doing is a 25% tariff on all cars that are not made in the United States. If they're made in the United States, it is absolutely no tariff." Even so, according to auto industry analyst Daniel Ives of Wedbush Securities, "Tesla is the one least impacted" among U.S. carmakers.

In conclusion, the escalating trade tensions and the likelihood of retaliatory measures from affected countries could have significant long-term economic implications for the US and its trading partners. These implications include increased costs and prices, disruption in supply chains, retaliatory measures, economic slowdown, impact on specific industries, and impact on stock markets. Investors should brace for a bumpy ride ahead as the global market navigates these uncertain waters.