President Trump announces autos tariffs

President Trump has announced a 25% tariff on auto imports which he has said will go into effect on April 2, the same day that the touted reciprocal tariffs are scheduled to begin. The levy will include completed vehicles as well as key parts including engines and transmissions and could be extended to further parts at a later date.

Durable goods orders in the US grew 0.9% m/m in February, down from 3.3% in January. Stripping out the volatile transportation component the figures were more positive, with growth at 0.7%, up from 0.1% previously and far higher than the predicted 0.2%. Nevertheless, core capital goods orders were down 0.3% m/m, the first fall since October, with companies maybe holding back on investment given uncertainty around tariffs and other policies from the Trump administration. This was also likely a factor in the 0.9% m/m rise in goods ships which could be a sign that firms were racing to complete imports ahead of tariffs.

CPI inflation in the UK fell to 2.8% y/y in February, beating expectations that it would remain at the 3.0% seen in January. Prices were 0.4% higher m/m, compared with a 0.1% drop on the previous reading. Core inflation also came in softer than anticipated, falling to 3.5% y/y, down from 3.7% and lower than the predicted 3.6%. Women’s clothing led much of the drop while alcohol & tobacco was a major upwards driver of price growth. The fall in the headline figure raises the chance of a rate cut from the Bank of England at its May meeting. It was also was positive news for Chancellor of the Exchequer Rachel Reeves ahead of her spring statement yesterday where she sought to restore her fiscal buffer by cutting spending on welfare and civil service headcount.

Egypt has announced its draft budget for the next fiscal year starting in July, with plans to boost spending by 18% to EGP 4.6tn (USD 91bn). This will be offset by an anticipated 19% rise in revenue with the government targeting a primary surplus equivalent to 4% of GDP and bringing debt/GDP down to 92%.

Today’s Economic Data and Events

16:30 US initial jobless claims, week to March 22. Forecast: 225,000

16:30 US GDP annualised % q/q, Q4 2024, third print. Forecast: 2.3%

Fixed Income

• USTs lost ground again on the longer end yesterday amid tariff uncertainty. Yields on the 2yr were almost unchanged at 4.0166% but the 10yr yield closed up 4bps at 4.3519%.
• The fall in UK inflation combined with Rachel Reeves’ moves to cut government spending were welcomed by bond markets as yields on gilts fell yesterday, especially on the longer end. The 30yr yield dropped 6bps to 5.309%, while the 2yr closed 1bps lower at 4.290% and the 10yr was 3bps lower at 4.728%.

FX

• The dollar strengthened yesterday amid a search for safety after President Trump’s announcement on auto tariffs. The dollar index closed up 0.4% against its basket of peers.
• GBP sold off yesterday after the softer inflation print raised expectations for rate cuts from the BoE, and it fell 0.4% to 1.2888. EUR dropped 0.3% yesterday to 1.0754, with April 2 now set to see a significant impact on Eurozone businesses.
• Japan is also a major car exporter to the US and the yen lost weakened by 0.4% against the dollar yesterday to 150.57.

Equities

• Equity markets sold off yesterday on the back of the autos tariff announcement. In the US, the Dow Jones, the S&P 500, and the NASDAQ lost 0.4%, 1.1%, and 2.0% respectively.
• Locally, the DFM closed flat while the ADX added 0.3%. Saudi Arabia’s Tadawul gained 2.3%.

Commodities

• Oil markets were given a boost by a drop in US crude stockpiles last week in data from EIA released yesterday. Inventories declined by 3.3mn bbl, the biggest drop of this year and taking stockpiles to the lowest in a month.
• Brent futures closed up 1.1% at USD 73.8/b while WTI added 0.9% to USD 69.7/b.