We are in full tariff war and we are seeing tense moments in the economy and markets. There is a key date, on April 2, where several of the rates announced by US President Donald Trump can be launched, which has imposed 25 % of cars imports and this includes vehicle parts as well. Can this cause global economic damage?
What Trump is doing with his tariff commercial policy is a distancing from the multilateral commercial system that the United States himself led after World War II. It will definitely have an impact on the economic growth of the world due to the fact that this circumstance has led us to a situation of waiting and seeing. What does that imply? That people, families, companies, given a situation like this decide to wait to see what happens after April 2. And in some cases they postpone their investments, in other cases they cancel the projects … and that already has an impact on the economy.
It is known that uncertainty is the worst enemy of trust and, therefore, of the economy. While this context of uncertainty continues, it will be harmful to the economy. In fact, according to a study by the US International Trade Commission, before a 25% tariff it will be caused that purchases are reduced by 75% and, at the same time this has an impact on the domestic market, that is, that the price of the products rises and that means inflation.
How will this affect automobile and consumer companies, who wants to buy a vehicle?
The European automobile sector fell strongly in the stock market. The European Cars Manufacturers Association was deeply concerned about Trump’s announcement that said he globally harms car manufacturers in the world, also to the US industry. On the other hand, also the Japanese manufacturers fell and the prime minister said that the tariffs would cost the main Japanese manufacturers up to 32 billion yen and that, of course, throwing some losses since Japanese vehicles have enough sales in the United States.
And how does the consumer affect?
In economics there is a term to talk about taxes and tariffs that is the tax incidence, which defines the distribution made of the tax burden between interested parties. In this case we are talking about an importer and a consumer. Companies hardly lose because they generally transfer everything to the consumer. And now the estimates are that a vehicle with these new conditions will increase its price between $ 4000 to $ 1000.
Trump has also talked about other tariffs in the future, such as copper imports, pharmaceutical products, wood and semiconductor industry. The White House estimates that will raise 100,000 million dollars annually in tariffs. What are exactly those that enter into force on April 2?
On April 2 there will be 25 % tariffs, cars, pharmaceutical and semiconductor products. That is defined. Another of Trump’s executive orders affects oil, in this case Venezuelan oil and therefore could have global consequences. USA announced a 25 % tariff to nations that buy oil from the South American nation. And there has already been an answer. For example, the largest refining operator in the world in India has said that Venezuelan oil imports will stop. And there is also uncertainty in the main oil buyer in Venezuela, which is China.
So we will have more expensive vehicles and also the price of fuel will increase….
It is not clear. Actually, if the measure announced by Donald Trump will be carried out, in some cases it is private companies that buy the product of Venezuela, such as Repsol so, the main affected would be the countries that import or buy the oil of Venezuela, such as China or the US, which is the second largest importer although contradictory homeland and, in fact, it has extended the license to Chevron to continue to operate in the country until 27 May.
This can raise the price of fuel globally because there was some shortage – we must remember that Venezuela is an important oil producer in the world – and sells to China, USA, India, Spain, Vietnam, Singapore, Russia … among other countries. Having shortages, the price will increase.
All this situation, all Donald Trump’s decisions are affecting the bags around the world that have had falls. Investors a little nervous against this panorama have opted for the gold that has reached new records. What are the sectors that could be safer to invest at the moment and that affect them less this tariff war?
Digital services and technology. Because? Because these have less dependence on physical trade and that is important. It can also be invested in health and biotechnology, also in basic consumption or financial services. And something very important, strategic raw materials such as gold, silver, lithium, for example, which is in vogue, while the renewable energy sector is an attractive sector in which investors can invest their money.
On the other hand, we continue to know economic data from the US here, perhaps it is still a bit soon to see if Trump’s measures have the answer that awaits him, but we already know that American business activity was recovered in March, the expense of personal consumption showed a 0.4 % increase last month and in a few days we will know the data of unemployment.
One of the things that is already impacting is consumer’s confidence. He has sunk. In December we were with a reading of 112.8 and it has been descending consecutively and now we are at 92.2. Inflation expectations have been shot, they are already latent. There are cuts and adjustments regarding the estimates of the gross domestic product in this first quarter. There are specialists and institutions that have estimated that GDP can be contracted by 2.4%. Now the alarms of the recession have returned. The commercial deficit in the US has fired 60%, export imports have been greater, but why have companies try to buy as much as possible before these tariffs are entered in force? They are things that are letting themselves feel and, as I said, we are in the economy of waiting and seeing.