President Donald Trump, with great fanfare, declared a 25%-tariff on cars not produced in the United States. This tariff is scheduled to go into effect on April 2. This move is the latest tactic in a much larger plan to penalize countries that persist in keeping tariffs on U.S. exports. The different elements of that announcement have already sent shockwaves through the stock market, resulting in wild swings of major stock indices and individual company shares.
The tariff news are newsworthy enough to rattle the entire market. General Motors’ shares sank more than 4% in after-hours trading and Ford fell roughly 2%. Stock futures fell across the board on Wednesday after the White House’s announcement. Similarly, futures tied to the Dow Jones Industrial Average dropped by 132 points, or 0.3%. At the same time, S&P 500 futures and Nasdaq 100 futures fell by 0.3%.
The tariff will go into effect on the date reciprocal tariffs are enacted. As President Trump has dubbed this day “Liberation Day.” He has consistently advocated for imposing such duties on countries with existing tariffs on U.S. imports since the beginning of his second term in January.
The S&P 500 has rocketed up nearly 1 percent this week. At the same time, the Dow Jones Industrial Average is up by 1.1%.
"It's pretty easy to do, if parts are made in America and a car isn't, those parts are not going to be taxed or tariffed," – Donald Trump
The tariff announcement pushed the Dow, S&P 500 and Nasdaq to session lows Wednesday. Investors rushed to evaluate just how disruptive it would be to the automotive world and the economy at large. The market’s bloodbath reaction serves to underscore a still simmering investor concern regarding potentially disruptive trade policies and their implications on complex global supply chains.