Car tariffs more proof that Trump’s new world order is coming
Just two weeks after the US president bought a Tesla from Elon Musk’s electric vehicle maker, he hit the products coming out of its global factories.
Mar 27, 2025 – 10.12am
Tariff Man giveth, Tariff Man taketh away – even for his best mates.
Just two weeks after US President Donald Trump bought a Tesla from Elon Musk’s electric vehicle maker, he hit the cars coming out of Tesla’s factories in Germany and China with a new sales tax. That came when he finally confirmed on Wednesday night (Thursday AEDT) a 25 per tariff on cars made outside America.
“We’re signing an executive order today that’s going to lead to tremendous growth in the automobile industry,” Trump said in a rambling appearance in the Oval Office. At that event, the economic benefit of the vehicle tariffs was initially estimated at more than $US100 billion ($159 billion), before Trump immediately upped his estimate of the benefit from $US600 billion to $US1 trillion within two years.
Tesla shares fell 5.6 per cent on Wednesday night, and are now down almost 30 per cent since the start of the year. The consumer backlash to Musk’s role in the Trump administration accounts for some of that. But Tesla itself has warned that it faces a financial hit from America’s tariff agenda.
Trump said he had not discussed the car tariffs with Musk because the entrepreneur has a conflict. The president declared Musk had never asked him for a policy change that would benefit his business interests.
“I am actually a little surprised by it,” Trump said, in a comment that perhaps reveals more about Trump than Musk.
The new car tariffs, which immediately whacked the share prices of car markers, will come into effect on April 2, which Trump has declared will be Liberation Day for the American economy. It’s on that day that Trump is promising to announce reciprocal tariffs on all of America’s trading partners. ‘We are going to be very nice, actually’
Hopes that Trump will target only selected countries appear to have been dashed. Trump said on Wednesday night that the US would place tariffs on all trading partners, before claiming the world would be “pleasantly surprised” with the package.
“We are going to be very fair, we are going to be very nice, actually,” Trump said. “We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years. They’ve taken so much out of our country, friend and foe.”
He said he also remained determined to introduce sectoral tariffs in areas such as pharmaceuticals, energy and timber. Copper tariffs are also much on the market’s mind.
Separate surveys by Goldman Sachs and Deutsche Bank suggest market respondents expect an average tariff range of about 9 per cent across the US economy. That would mean a tripling in the current rate of tariffs imposed.
But Wednesday night’s announcement of automotive tariffs underscore how difficult the calculus is here as different tariffs are in effect stacked on top of each other. And that’s before investors try to sort through the potential for Trump to delay the implementation of some or all of the tariffs as he seeks to negotiate or cajole other nations into deals. That said, Trump did say on Wednesday night that the car tariffs would be permanent. Investors must zoom out
This is all great drama – or farce, depending on how you want to look at it – but investors need to zoom out and consider what’s going on here.
It’s becoming clear that tariffs are not a negotiating tool or theatrics, but a fixed part of the Trump administration’s policy agenda. The question investors need to keep asking is whether this is the first stage of a grander plan to reorganise global trade relations, leading to the so-called Mar-A-Lago accord that has been dreamt up by Stephen Miran, Trump’s chairman of the Council of Economic Advisers.
The idea behind the accord is that the US will give the G7, the Middle East and Latin America security and access to US markets. In return, these countries will agree to intervene to depreciate the US dollar, increase the size of the American manufacturing sector, and solve Washington’s debt problems by swapping existing US government debt with new US Treasury century bonds. A series of carrots (including security guarantees) and sticks (including tariffs) help seal the deal.
What the market fears is that such an accord would cause a loss of trust in America and American assets. In that case, the repricing of the US dollar, US equities and US bonds is only getting started.
BCA Research strategist Marko Papic reckons Miran walked back his big idea a little in an interview with Bloomberg this week, suggesting his accord plan was little more than a “catalogue of options”, and made it clear that Trump is focused on tariffs.
“The entire interview suggests that the Trump administration is well aware of the exodus of foreign capital out of the US,” Papic says.
This column is not as convinced as Papic. The interview includes Miran’s full-throated endorsement of tariffs and his suggestion that a Mar-A-Lago accord to push down the US dollar could be pursued down the track.
“We have been moving on tariffs. We are going to continue moving on tariffs. April 2nd is around the corner, and that’s the sole focus right now. Could it be something that is entertained down the road? Sure, it could, but right now the president is focused on tariffs.”
Trump and his team are trying to do something very big here. We’re closer to the start of the story than the end.
