Auto Stocks on a Rollercoaster: How Trump’s Tariff Moves Are Shaking the Industry

The automotive sector has become the latest battleground in President Trump’s tariff war, with stocks swinging wildly in response to his administration’s policy pivots. On April 9, 2025, Trump announced a 90-day pause on “reciprocal” tariffs for most countries—except China—sending auto stocks soaring. Tesla surged 22.69%, while airlines like United and Delta jumped over 20% as relief from import duties on aircraft parts and vehicles lifted immediate pressures. Yet by the next day, markets retreated sharply, reflecting the fragile equilibrium between temporary respite and unresolved trade chaos.

The Tariff Truce: A Bumpy Rally for Auto Stocks

Trump’s decision to slash tariffs on non-Chinese auto imports from 25% to 10% provided immediate relief to automakers reliant on global supply chains. U.S. airlines, which had been hammered by tariffs on foreign-made aircraft and automotive components, saw their stocks skyrocket. . However, the broader auto industry’s gains were uneven. European and Asian manufacturers, still grappling with retaliatory tariffs, faced continued headwinds. Nissan’s Infiniti brand, for instance, halted production of two Mexico-built crossovers for the U.S. market due to persistent 25% tariffs on imported vehicles, a stark reminder of the industry’s vulnerability.

The Geopolitical Hangover: Why the Rally Didn’t Stick

While markets celebrated the initial tariff pause, the exuberance was short-lived. The Dow’s 2,963-point surge on April 9—the best day since 2008—faded by April 10 as investors digested lingering risks. China’s exclusion from the tariff relief triggered a 84% retaliatory tariff on U.S. goods, while the EU maintained 25% duties on American autos. . Analysts warned that Trump’s “whiplash” policies risked stifling global trade, with Deutsche Bank estimating a 30% probability of a U.S. recession by 2026.

The auto industry’s pain is not confined to the U.S. South Korea’s Kospi index dipped into bear territory as its auto-dependent economy buckled under retaliatory measures, while Taiwan’s tech and auto supply chains faced historic volatility. .

Trump’s Double-Edged Sword: Policy Uncertainty and Market Psychology

Trump’s mixed messaging amplified investor anxiety. His social media posts—like “BE COOL!” and claims of a “record” market surge—contradicted his refusal to clarify whether tariff reversals were tied to market pressures. Treasury Secretary Scott Bessent downplayed recession risks, but JPMorgan analysts noted that U.S. Treasuries faced “unprecedented distrust” as global investors sought safer havens.

The political backlash is mounting. Sen. Chuck Grassley pushed bipartisan legislation to curb presidential tariff authority, signaling that even Republicans are wary of Trump’s unilateralism. For automakers, this means navigating a landscape where policies can shift overnight, deterring long-term investments.

Conclusion: Auto Stocks’ Fragile Boom

The auto sector’s recent volatility underscores a critical truth: temporary tariff pauses are not a substitute for sustainable trade stability. While Tesla’s 22.69% jump and the Dow’s historic gains on April 9 highlighted short-term relief, the subsequent market pullback and geopolitical fragmentation reveal deeper risks. With China and the EU maintaining retaliatory tariffs and legislative pushback growing, automakers face a precarious path.

Investors should heed the warning signs:
- Immediate Winners: Companies with diversified supply chains (e.g., Tesla) or those benefiting from U.S.-centric demand may see brief gains.
- Long-Term Losers: Automakers reliant on transatlantic or Asian trade, such as Ford or Toyota, face persistent headwinds.
- Systemic Risks: Trump’s policies have already contributed to a 14% drop in global trade volumes since 2023, per World Bank data, squeezing margins across the sector.

The auto industry’s future hinges on more than tariffs—it demands predictable policies and global cooperation. Until then, investors are betting on a game of political whack-a-mole, where every upswing carries the shadow of the next collapse.