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Morgan Stanley warns investors against auto tariffs

Bloomberg

Investors should prepare for at least a temporary imposition of auto tariffs before this summer, Morgan Stanley has said.

“Although we expect any auto tariffs would be fleeting, the event would certainly create at least some near-term pressure on economic fundamentals and investor sentiment,” Morgan Stanley’s Michael Zezas and Meredith Pickett wrote in a Feb. 13 note, calling it a “low-conviction” view.

While Morgan Stanley expects any tariffs to be rolled back quickly, implementation could happen by the summer, the strategists said.

US Secretary of Commerce Wilbur Ross is expected by Sunday to submit to US President Donald Trump a report on his investigation assessing how imports of autos and vehicle parts affect US national security.

Trump has threatened a tariff of as much as 25 percent and has focused on vehicles from the EU.

He has pledged to refrain from imposing new levies on vehicles imported from the EU while the two sides try to reach a broader trade agreement.

In assessing the negative effect of any tariffs, the strategists cited a Center for Automotive Research report from July that said the price of new and used vehicles would rise, and dealers would see employment declines and a decrease in revenue.

Goldman Sachs Group Inc is also warning investors to brace for the possibility of tariffs.

A report recommending them could come as a “slight surprise” to financial markets, economist Alec Phillips wrote in a note yesterday.

He sees a 40 percent chance of broader auto tariffs “at least temporarily,” in an attempt to obtain greater concessions from the EU and/or Japan.

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