Stocks skidded in afternoon trading after the White House signaled that President Trump on Wednesday would announce more tariffs, with the latest salvo targeting U.S. auto imports.
The S&P 500 dropped 64 points, or 1.1%, to close at 5,712, the Dow Jones Industrial Average fell 0.3% and the Nasdaq Composite nosed down 2% as investors pulled back from major technology players.
After a delayed announcement, Mr. Trump said he is imposing a 25% tariff on all vehicles imported into the U.S.
Shares of automakers also slid, with General Motors sinking 3.2% and Stellantis, the parent company of Chrysler, Dodge, Jeep and Ram, dropping 3.5%. The Detroit automakers’ manufacturing plants and supply chains are spread across North America, so additional tariffs would raise their costs and crimp profits.
Tesla shares, which have slumped this year because of disappointing sales and consumer unhappiness over CEO Elon Musk’s involvement with the Trump administration, fell nearly 6% and are down 33% this year.
Consumers are also likely to feel the sting of additional import duties. New tariffs on U.S. car imports could drive up vehicle costs between $2,000 and $12,200 for some models, Anderson Economic Group has estimated.
Beyond the impact on the auto sector, investors have been rattled by President Trump’s protectionist trade policies. The U.S. is scheduled to announce a raft of tariffs on April 2, including 25% duties on imports from Mexico and Canada, along with even more sweeping matching levies on a number of U.S. trading partners.
“The fact of the matter is that Trump remains firmly wedded to a Tariff First policy, his pain threshold is high and there are no voices around him counseling restraint or prudence,” Adam Crisafulli, head of investment advisory firm Vital Knowledge, said Wednesday in a note to investors.
He added, “Even those who might agree with the long-term benefits of tariffs have to acknowledge there will be a multi-quarter period of substantial disruption to the economy, with softer growth and higher inflation.”
The Federal Reserve earlier this month cited the likely impact of tariffs in lowering its outlook for U.S. economic growth to 1.7%, while also forecasting a pickup in inflation.
A new analysis by Oxford Economics found that U.S. tariffs could raise the cost of some products by as much as 4%, with home appliances, musical instruments, tableware and utensils, and personal care items potentially seeing the biggest price hikes.