Trump shakes markets again on new auto tariffs – US final Q4 GDP tonight

General trend

- US Pres Trump shook up global markets again prior to the start of Asian trading, signing an Exec Order on auto tariffs at 25% for all cars and light trucks not made in US (raised from current base tariff of 2.5%).

- The reaction was fairly muted in currencies and bonds, with only minor weakness in the Mexican Peso and Canadian Loonie, perhaps as the move had been telegraphed earlier. However, the political reaction was strong, particularly out of Canada where new PM Carney said the auto tariffs were a 'direct attack' on Canadian workers, and that while the tariffs will "hurt us" also threatened retaliatory tariffs in response. Brazil’s Lula also threatened retaliatory tariffs while EU Commission Pres Von der Leyen said the EU will assess this announcement, as Japan PM Ishiba was more circumspect, appealing to the US for an exemption and reminding the US that Japan as a country has offered to make the largest investment to the United States. Taiwan also more circumspect, vowing to ‘continue talks’ with the US.

- Auto makers in Japan fell sharply at the Nikkei open, as auto associations in the EU and UK appealed for negotiations. Nissan -3%, Honda -3%, Toyota -3%, Mitsuibishi -4%, Subaru -6%; while in Korea Hyundai -4%, Kia -4% and in India Tata Motors -5.5%. However, Chinese automakers fared better as they are already highly tarriffed in the US and not highly exposed to that market, BYD +2%, Xpeng +0.5%.

- Trump also suggested "a little reduction" in tariffs if China agrees to a deal on TikTok in the US, coming as US trade envoy Greer met with China officials on bilateral trade and economic ties. However, a former PBOC official warned outright that China needs to be prepared for trade war with US.

- Hang Seng and Shanghai Composite both positive where other Asia markets saw losses. Perhaps in a sign to Trump's ‘a little reduction’ nod to China above.

- After the prior week’s 2nd highest-ever purchases of long-term Japanese securities, this week’s purchases by foreigners saw another healthy dollop of long-term JP bond buying within Japan’s weekly equity and bond flows.

- After today's Japan 40-yr JGB auction was well supported with the highest bid-to-cover since Sept 2023, 40-year yields fell from 2.95% down to about 2.85% area.

- China reported another shrinkage in corporate profits for Jan-Feb, though at the lowest rate of decrease since Sept last year.

- Copper hit fresh record highs, +0.5% to $5.2675/lb.

- US equity FUTs +0.1% during Asian trading, after heavy falls during NY trading.

Looking ahead (Asian time zone)

- Thu Mar 27th (Thu night US final Q4 GDP).

- Fri Mar 28th JP BOJ Summary of Opinions, (Fri night US Feb Core PCE).

Holidays in Asia this week

- Fri Mar 28th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,989.

- Australia sells A$100M vs. A$100M indicated in 0.75% Nov 2027 indexed bonds: Avg Yield: 1.6380% v 1.0981% prior; bid-to-cover: 5.30x v 3.90x prior.

- RBNZ board has yet to recommend a temporary RBNZ Gov to Finance Min Willis - Press.

China/Hong Kong

- Hang Seng opens +0.3% at 23,543; Shanghai Composite opens -0.2% at 3,362.

- China Feb YTD Industrial Profits Y/Y: -0.3% v -3.3% prior.

- USTR Greer and China Vice Premier He held talks on bilateral trade and economic ties; Greer expressed serious concerns about China trade practices – press.

- Former PBOC official Zhu Min: China needs to be prepared for trade war with US - financial press.

- China Vice Premier Ding Xuexiang: There is a significant rise in uncertainties in the world - comments at Boao Forum.

- China State Council: Govt will support cities including Shanghai, Beijing and Guangzhou to encourage a consumptive environment.

- Bank of China VP: Bad loans from individual businesses and mortgages are growing.

- CK Hutchison (1.HK) Follow up: Co and Hong Kong govt said to seek 'reasonable way out' as Panama deal deadline nears; China said to pause new deals with major holder Li Ka-Shing and his family - financial press.

- China PBOC sets Yuan reference rate: 7.1763 v 7.1754 prior.

- China PBOC Open Market Operation (OMO): Injects CNY219B in 7-day reverse repos; Net drains CNY50B v injects CNY160B prior.

Japan

- Nikkei 225 opens -0.7% at 37,718.

- Japan releases weekly flows data [period ended Mar 21st]: Foreign buying of Japan equities: -¥1.21T v -¥1.81T prior; Japan buying of foreign bonds: -¥207.1B v -¥83.5B prior.

- Japan PM Ishiba: Refutes recent reporting out of Jiji; Did Not say will roll out new budget spending on prices - comments in parliament.

- Japan PM Ishiba: [In response to US auto tariffs]; Need to think about appropriate response - financial press.

- Japan Economy Min Muto: Reiterates will keep asking for exemptions 'strongly' - post on X.

- Former Japan official Nakao: Yen level is 'too cheap'; BOJ should normalize monetary policy.

- BOJ's Koeda: Mandate is to contribute to a healthy economy; Sees positive steps in wages and inflation - inaugural comments (1st press conference) [overnight update].

- Japan sells ¥700B VS. ¥700B indicated in 40-year JGB bonds; yield at lowest accepted price: 2.7100% V 2.5700% prior; bid-to-cover: 2.92X V 2.75X PRIOR (highest bid-to-cover since Sept 2023).

Korea

- Kospi opens -0.9% at 2,620.

- North Korea has tested suicide drones with AI capability - Korea press.

Other Asia

- Taiwan Central Bank (CBC) Dep Gov Chu Mei-lie: To continue talks with the US over any tariffs.

North America

- BYTEDANCE.IPO Follow up: Deal for TikTok in the US reportedly close to agreement - US press.

- Canada PM Carney: 25% auto tariffs are a 'direct attack' on Canadian workers; Tariffs will "hurt us" but we will defend our country; We have 'options' on retaliatory tariffs - financial press.

- US Pres Trump: Signs EO on auto tariffs at 25% for all cars, and light trucks, not made in US (raised from the current base tariff of 2.5%); Other countries "will be pleasantly surprised" on April 2nd when we announce reciprocal tariffs.

- (CA) Ontario Premier Ford: I fully support the Federal Govt preparing retaliatory tariffs to show that we'll never back down.

- (BR) Brazil President Lula: Will impose retaliatory tariffs on US products - financial press.

- OPENAI.IPO Follow Up: Said to be close to finalizing $40.0B funding led by SoftBank - US financial press.

- (US) White House official says Trump Admin may not take all of non-tariff barriers (like VAT) into account in setting reciprocal tariffs - CNBC's Javers.

- (US) MBA Mortgage Applications w/e Mar 21st: -2.0% v -6.2% prior.

- (BR) Brazil Feb Current Account Balance: -$8.8B v -$9.0Be; Foreign Direct Investment (FDI): $9.3B v $5.5Be.

- (US) FEB PRELIMINARY DURABLE GOODS ORDERS: +0.9% V -1.0%E; DURABLES (EX-TRANSPORTATION): 0.7% V 0.2%E; Capital Goods Orders (non-defense/ex-aircraft): -0.3% v +0.2%e.

- Coreweave: David Faber: Hearing $47.00 to $55.00/shr IPO pricing; Fair amount of negativity overall on concerns over contract renewals and debt load from capex upgrades - CNBC.

- (US) White House official says Trump Admin may not take all of non-tariff barriers (like VAT) into account in setting reciprocal tariffs - CNBC's Javers.

- (US) Fed's Kashkari (non-voter): Job market has stayed strong; The biggest challenge is to finish the job; We've more work to do on lowering inflation.

- (US) DOE CRUDE: -3.3M V +1ME; GASOLINE: -1.4M V -2ME; DISTILLATE: -0.4M V -1ME.

- (US) Treasury $70B 5-year note auction draws 4.100% V 4.123% prior, BTC 2.33 V 2.42 prior and 2.39 over the last 12.

- (US) Fed's Musalem (voter): May hold rates for longer if secondary tariffs has impacts; Wary of assuming tariff inflation impact will be temporary; Second round effects could be more persistent; Growth does appear to have slowed, surveys point to caution among businesses and consumers.

- (US) White House Press Sec Leavitt: Pres Trump will hold press conference at 4:00PM ET on auto tariffs.

- (CA) Bank of Canada (BOC) Summary of Deliberations (March Minutes): Agreed to proceed carefully on future rate decisions; Trade war likely to weigh on economy and increase CPI pressures.

- (US) Reportedly auto parts could be excluded from auto tariffs announcement - press.

Europe

- (DE) Germany VDA: US auto tariffs are 'fatal signal' for free trade; Germany auto industry is calling for immediate negotiations between the US and EU on bilateral agreement.

- (EU) Commission Pres Von der Leyen: Deeply regrets the US decision to impose tariffs on European auto exports; We'll now assess this announcement, together with other measures the US is considering, in the following days.

- (IL) Israel Central Bank (BOI) Gov Yaron: Economy has yet to return to pre-war conditions; r repercussions to continue for many years - Annual Report.

- (EU) ECB’s Villeroy (France): See a margin to cut rates 'pragmatically'; Trump is destabilizing the multilateral system.

- (UK) chancellor of the exchequer (Fin Min) reeves spring budget statement; Reiterates to raise defense spending and cut aid; To provide extra £2.2B for MoD next year.

- (UK) Office for budget responsibility (OBR) economic and fiscal outlook.

- (CZ) Czech Central Bank (CNB) leaves 2-week repurchase rate unchanged at 3.75%; as expected.

- (UK) DMO FY25/26 GILT REMIT: £299.2B V £304BE.

- (EU) ECB's Holzmann (Austria): Must be cautious in reducing rates; Rates already in neutral territory; Wouldn't cut interest rates at next meeting - press interview.

- (EU) ECB’s Centeno (Portugal, dove): Given the fragility of the economy and where neutral rate is estimated to be, we can expect further rate cuts; Tariffs are taxes and will be negative for the economy - Econostream interview.

- (UK) Chancellor (Fin Min) Reeves: Cost of living crisis still very real for Britons; Regarding Digital Services Tax: Companies should pay taxes in the countries which they operate - comments to press.

- (EU) EU Trade Commissioner Sefcovic confirms US Pres Trump's tariffs will be around 25% following meetings in Washington this week - FT.

Levels as of 00:20 ET

- Nikkei 225 -0.8%, ASX 200 -0.4%, Hang Seng +1.1%; Shanghai Composite +0.3%; Kospi -1.0%.

- Equity S&P500 Futures +0.1%; Nasdaq100 +0.1%; DAX -0.1; FTSE100 -0.1%.

- EUR 1.0733-1.0787; JPY 150.06-150.62; AUD 0.6279-0.6317; NZD 0.5712-0.5745.

- Gold +0.5% at $3,069/oz; Crude Oil +0.1% at $69.75/brl; Copper +0.2% at $5.2535/lb.