A Time for Steady Hands

The market volatility this week has been jarring — some of the most intense swings we’ve seen since the early days of the COVID-19 crisis. Much of it has been driven by the announcement of substantial new tariffs under what Trump has labeled “Liberation Day,” a move that is not only economically disruptive but also politically divisive. For many of you, especially those who are frustrated by President Trump’s return to the spotlight, this moment may feel chaotic, irrational, and frankly exhausting.

We want you to know that we feel that, too. You’re not alone. This is one of those moments when it feels like the headlines are relentless, the outlook is murky, and the future is hard to imagine. But it’s important to remember — this is not new. We’ve been here before. Every major period of stress in the markets—from the Great Financial Crisis to COVID—has come with that same feeling: This time is different, and we might not make it through. Yet, every single time, we do. We adapt. We evolve. The market and the economy find a way forward.

That doesn’t mean we ignore the challenges. These new tariffs, particularly those affecting the auto industry, will have real consequences for manufacturers and consumers alike (see below).

What matters most is how we respond. And we’re proud to say that your portfolios are positioned for times like this. With strategic allocations to gold, commodities, fixed income, and a healthy level of cash, you’ve benefited from diversification when it matters most. These aren’t just passive decisions — they’re part of a deliberate strategy to help weather uncertainty and protect long-term goals and the performance of your portfolio reflect this.

So, we urge you to stay disciplined. Market fluctuations are temporary. Emotional decisions are costly. Long-term planning works—especially in moments that test our patience.

Trump’s Auto Tariffs Reshaping the Industry

President Trump’s recent decision to impose a 25% tariff on imported vehicles and auto parts is set to upend the automotive landscape, creating significant challenges for both manufacturers and consumers. The tariffs, which went into effect on April 3rd, are expected to raise costs across the board, impacting automakers’ profitability, supplier profitability, consumer pricing, and the broader economy.

Brand nameplates mean little when it comes to how and where cars are manufactured. Below we looked at the U.S. content of the 10 best-selling models in 2024 and then cross referenced with the Cars.com American-Made Index, which ranks 100 models by U.S. content. Below are the ranks of the best-selling models and it doesn’t look good. Most of the best -selling models rank fairly low in U.S. content, implying that the best sellers are probably more likely to see meaningful price increases due to the tariffs.

General Motors (GM) could be hard hit due to a large portion of vehicles being assembled in Mexico. In 2024, around 25% of GM’s vehicles sold in the U.S. were assembled in Mexico. Investment research firm Morningstar has already downgraded GM’s fair value estimate from $81 to $73 per share and projects a staggering 53% decline in its 2025 earnings per share.

Ford Motor Company, while also impacted, is in a slightly stronger position. With 80% of its U.S.-sold vehicles assembled domestically, Ford is somewhat shielded, but not immune. Morningstar forecasts a 63% drop in its 2025 earnings per share, highlighting the broad and deep impact of the tariffs across the industry.

Of the foreign auto makers, Honda appears to be in the best shape with six models in the top 15 of the Cars.com Index. While Mercedes Benz and BMW dominate the bottom ten on the list with each having three models in the bottom ten. Access to the dominant U.S. consumer may well require many automakers to re-think supply chains and manufacturing while attempting to sell their cars at higher prices.

For car buyers, the fallout could be painful. Analysts at Morningstar estimate that new vehicle prices could increase by $3,000 to $6,000 depending on the model and where it’s built. Luxury imports could see even steeper hikes of up to $15,000 in some cases.

Models with high U.S. content will likely be in higher demand which will likely drive dealers to ask for premiums, as we saw during COVID. Higher prices are expected to push many consumers toward the used car market, inflating demand and driving up prices for pre-owned vehicles, which remain is somewhat short supply since COVID. Repair costs will also increase as parts are also subject to tariffs. Following the falling dominos, higher repair expenses should also result in increased insurance premiums, making car ownership more expensive.

There is little relief for car owners with one possible exception. The Administration is looking to make auto loan interest tax deductible on US cars, although there are few details on how that would work.

Wider Economic Consequences

The ripple effects of the tariffs go beyond the auto industry. As manufacturers will pass on at least some costs to consumers. The administration argues that this is a one time price increase and therefore not inflationary, but time will tell. Economists warn this could weaken consumer spending and shave an estimated 0.6% off GDP growth in 2025.

Broadly speaking, the tariffs are designed to incentivize companies to bring more manufacturing back to the U.S., While this process started post COVID, The Administration is looking to accelerate that process, promising job gains. It appears it is working to some degree. The Governor of Mississippi says he’s running around making proposals globally for manufacturing companies to invest in Mississippi and the auto industry has had several recent announcements

Hyundai

        • Announced a $21 billion U.S. investment, including a $5.8 billion steel plant in Louisiana to supply EV manufacturing sites.
        • Opened a $7.59 billion EV and battery plant in Georgia, expanding production capacity to 1.2 million vehicles annually by 2028.

Honda

        • Shifted production of its next-generation Civic hybrid from Mexico to an existing plant in Greensburg, Indiana, starting May 2028.

Stellantis

        • Plans to reopen a shuttered Illinois facility (Belvidere) by 2027 for midsize truck production, part of a $5 billion U.S. investment.

Toyota

        • Opened a $14 billion battery plant in North Carolina for hybrid and electric vehicles.

Automakers Face Strategic Crossroads

Ford, GM and Stellantis appear likely to face some tough decisions, particularly for their pick-up trucks, which are the best sellers for each. GM may have to consider relocating full-size truck assembly back to the U.S. Ford could face similar decisions for models like its Maverick compact pickup. Stellantis plans to reopen its shuttered Belvidere, Illinois facility by 2027 for midsize truck production, part of a $5 billion U.S. investment.

However, these strategic pivots would require significant capital investment and lengthy implementation, both factors could further erode margins and delay profitability.

What This Means for Investors

For investors, this shifting landscape presents both risks and opportunities:

  • High-risk: Automakers heavily reliant on imports or foreign assembly will face mounting financial pressure as long as the tariffs hold.
  • Resilient bets: Companies with robust domestic production or well-diversified product lines are likely to fare better.
  • Emerging opportunities: Used car dealerships and auto repair services could benefit from increased demand as consumers hold onto vehicles longer.

Investors should keep a close eye on upcoming earnings reports from GM, Ford, and other key players to better understand how these companies plan to navigate the road ahead.

Conclusion

The implementation of these tariffs marks a pivotal moment for the automotive industry. Automakers are being forced to rethink production strategies, while consumers face steeper costs at every turn. For investors, navigating this volatile terrain will require careful analysis of both immediate impacts and long-term shifts in the market.

Have a Calm Week!

 

What We’re Reading

 

Palumbo Wealth Management (PWM) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where PWM and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at www.palumbowm.com.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Past performance is no guarantee of future returns.

 

, , , ,

General News

By: Adam