Trump hints at automobile levies and exemptions on reciprocal tariffs

US President Donald Trump said on Monday that he would confirm automobile tariffs in the coming days, with the potential for exemptions for certain countries for the reciprocal import duties. He also indicated that he would soon confirm tariffs on lumber, semiconductors, and pharmaceutical products.

Trump announced last month that he would impose 25% tariffs on automobile, pharmaceutical, and semiconductor imports as soon as 2 April. He has also signed an executive order to investigate trade relations, aiming to introduce sweeping reciprocal tariffs, which is expected to take effect on the same day. Shortly after, he granted a one-month exemption on auto tariffs under the United States-Mexico-Canada Agreement (USMCA) on 3 March.

His comments added to further confusion about the ongoing erratic tariff plans, pushing other nations to accelerate talks with the White House in an effort to secure exemptions. “I may give a lot of countries breaks,” said Trump.

US stock markets rebound sharply, Tesla surges 13%

Trump’s remarks on potential tariff exemptions came at a time when investors were seeking bargains in the US stock markets after a four-week selloff. Dip-buys in big tech stocks buoyed Wall Street, with the Nasdaq jumping more than 2% on Monday. All the Magnificent Seven stocks finished higher, with Tesla leading gains, surging 12%. However, the electric vehicle maker’s shares are still down 31% year-to-date, as CEO Elon Musk’s political intervention continues to spark backlash.

The US dollar also rebounded for the fourth consecutive trading day following last week’s Federal Open Market Committee (FOMC) meeting. Federal Reserve Chair Jerome Powell downplayed the economic impact of Trump’s tariffs, citing upside pressure on inflation would be “transitory.” Expectations for Trump’s softened stance on tariffs and the Fed’s reassurance have both contributed to the US stocks and the dollar’s rebound.

European stocks and the euro retreat

By contrast, the rally in the US stock markets may have caused profit-taking moments in European equities, with both the Euro Stoxx 600 index and the DAX  declining for the third consecutive trading day. Notably, the record-setting rally in Germany’s stock markets lost steam after the European Union leaders failed to secure a €5 billion Ukraine funding package last week. Europe’s defence sector retreated sharply, leading to broad losses.

Additionally, Trump’s tariff threats may lead to retaliatory measures from the EU, expected to take effect next month. The European Commission announced on 12 March that the bloc would hit back with €26bn worth of American goods in April. An escalating trade war may trigger further selloffs in the regional markets.

The euro also weakened against the dollar for the fourth straight session, with the EUR/USD pair falling to under 1.08 during Tuesday’s Asian session, its lowest since 7 March. The decline was driven by a divergence in the government bond yields of the US and the EU.  The US 10-year Treasury yield jumped 8 basis points due to improved sentiment toward economic growth, while Germany’s counterparty yield only added 1 basis point.