Market Report.
🚗 U.S. President Donald Trump unveiled a 25% tariff on imported vehicles, expanding the global trade war and prompting criticism and threats of retaliation from affected U.S. allies. The new tariffs will take effect on April 3 and come on top of duties already introduced on steel, aluminum, and goods from Mexico, Canada, and China. The move led to sharp declines in Asian auto stocks, as major exporters like Japan, South Korea, and India were impacted. The United Auto Workers union praised the tariffs, seeing them as a step in the right direction to bring back manufacturing jobs to the U.S. Trump sees the tariffs as a way to raise revenue, offset tax cuts, and revive the U.S. industrial base, but many trade experts expect it to hurt the global auto industry.
📈 But, so far, Trump’s plan is working: European automakers like Volkswagen’s Audi and Mercedes-Benz are expanding production in North America to protect themselves against U.S. President Donald Trump’s tariff threats. Audi plans to produce its most important U.S. models in North America, while Mercedes will localize more production at its Alabama plant to shield itself from the rising trade tensions. European carmakers exported around 800,000 vehicles to the U.S. last year, about four times the number of U.S. car exports to Europe, leaving them bearing the brunt of the EU’s 10% tariffs. The German automakers, who account for 73% of the EU’s car exports to the U.S., are seen as the biggest losers in the trade war, as they have large U.S. production facilities. BMW has called for the EU to lower its 10% tariff on U.S. car imports to 2.5%, in line with the current U.S. import tariff, to benefit its exports from its South Carolina plant.
🇪🇺 The European Commission is signaling that it will assess the U.S. tariff plans and work to protect the EU’s economic interests, while still seeking negotiated solutions to the trade tensions with the United States. The EU is positioning itself to defend its businesses and citizens against the potential negative impacts of the proposed U.S. automotive tariffs. “As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the U.S. and the European Union,” European Commission President Ursula von der Leyen said in a statement.
⚔️ Trump said if the EU joined Canada in opposing the US, he would enact actions “far larger than currently planned.”
💶 Italy has issued tax demands to Meta (Facebook/Instagram), X (Twitter), and LinkedIn, claiming they owe a total of over 1 billion euros in unpaid VAT. The claims cover the period from 2015-2016 to 2021-2022, with the initial tax assessments covering 2015 and 2016 specifically. The Italian tax authorities argue that user registrations on these social media platforms should be considered taxable transactions, as they involve an exchange of personal data for access to the services. The case could have broader implications across the EU, as VAT is a harmonized tax, and the Italian approach could potentially affect other industries that provide free services in exchange for user data. Meta, LinkedIn, and X (Twitter) have 60 days to appeal the tax assessments before the judicial process begins, which could take up to 10 years on average in Italy. Italy has been actively pursuing tech companies over tax issues, with Google recently agreeing to a 326 million euro settlement, but this is the first time a settlement has not been reached.
💷 The UK Debt Management Office (DMO) announced it will issue £299 billion in government bonds this year, the second highest amount on record. However, the share of long-dated conventional gilts (over 15 years maturity) will drop to 13%, the lowest since 1990, down from nearly 20% this year. This reflects declining structural demand from pension funds and insurers for long-dated gilts, as well as the DMO’s analysis of cost and risk for the government. The DMO will increase the share of short-dated conventional gilts (up to 7 years) to at least 37%, up from 35%, to enable larger auctions. The DMO downplayed risks of the UK finding it harder to sell debt as other countries like Germany ramp up borrowing, citing the continued global demand for sterling and gilts.
Geopolitics:
🌍 Around 30 world leaders will meet in Paris today to discuss with Ukrainian President Volodymyr Zelenskyy how to strengthen military support, review ceasefire efforts, and assess their potential role if a peace deal is struck with Russia. The summit, organized by France, brings together leaders from countries like Poland, NATO, Italy, and Turkey to forge a European role in any talks to end the conflict. European efforts to create security arrangements for Ukraine are shifting from sending troops to considering alternative options like a “reassurance force” positioned in Ukraine to offer security guarantees and deter Russian aggression. However, the concept of a reassurance force faces political and logistical constraints, as well as potential opposition from Russia and the United States.
📜 Argentina plans to declassify government documents concerning Nazi fugitives who found sanctuary in the country after World War II. The decision was announced by President Javier Milei’s chief of staff, who said there is “no reason to withhold information” about the protection afforded to Nazis in Argentina. Estimates suggest up to 10,000 war criminals used “ratlines” to escape Europe and settle in Argentina, which was known for its reluctance to grant extradition requests. The influx of Nazis occurred mostly during the first presidency of Juan Peron, whose government explicitly supported Nazi exiles. Some of the files to be released pertain to financial matters involving services from Swiss banks related to the Nazi fugitives.
📰 According to the Politico report, EU foreign policy chief Kaja Kallas has faced criticism from nearly a dozen EU officials over her hawkish stance on Russia and leadership style: Kallas’ challenges began on her first day in office, when she tweeted that “The European Union wants Ukraine to win this war” against Russia, which some officials felt went beyond established language norms. Kallas has also been criticized for continuing to act like a prime minister by failing to adequately consult diplomats from member countries before making sensitive proposals.
Market View:
📉 US futures fell in the last few hours. The Mini S&P 500 futures fell back to 5,730 points after Donald Trump’s announcement about the application of tariffs on all vehicles. Currently, the Mini S&P 500 is trading at 5,765 points, while the Nasdaq 100 fell to around 20,050 points, from where it rebounded to the current 20,115 points. From a technical point of view, the graph does not show anything unexpected, as it is still a foreseeable contraction within a bullish channel.
💵 The movement of the dollar yesterday afternoon is striking. The DXY dollar index reached over 104.50 points and is currently at 104.40. Meanwhile, the EUR/USD reacted with the expected falls, reaching lows of 1.0735 before recovering slightly to the current level of 1.0770.
📊 In Europe, DAX 40 futures fell by more than 2.5% yesterday, reaching the current level of 22,870 points. However, the index is still in very bullish territory, having come close to its all-time highs on Tuesday.
🛢️ Oil maintains its upward trend. Yesterday, a barrel of Brent temporarily exceeded $74, although it has now dropped back to $73.50.
🏅 Gold has strengthened again and, in the last few hours, has approached $3,045. It is currently trading at $3,040 on its futures contracts.
💰 Finally, Bitcoin continues to push upwards in the $88,000 zone, forming a small wedge in the charts ranging from $86,500 to $88,300. This suggests a possible bullish breakout that could push it back above $90,000.
