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Trump's auto tariffs cause a drop in stocks and a rise in gold

The European stock market fell on Thursday, and Wall Street is expected to open lower as shares of some of the biggest automakers in the world tumbled following U.S. president Donald Trump's announcement on new tariffs for auto imports.

Trump announced 25% tariffs for all foreign-made vehicles and auto parts imported to the United States late Wednesday night, causing heavy losses overnight in Japanese and South Korean stock markets.

After the bell, U.S. automobile manufacturers lost ground. General Motors shares fell 6% while Ford shares dropped almost 5%. This was due to concerns over the impact of their supply chains.

European stocks dropped, as shares of Europe's largest carmaker Volkswagen, BMW, and Mercedes-Benz were all hit. STOXX 600 fell to its lowest level since March 14 and was down by 0.8% for the day as of 1209 GMT.

Investors braced themselves for the impact of the automotive industry in Germany. The FTSE 100 fell by 0.8%, and Germany's DAX also dropped by 1%.

The yields on euro zone bonds fell, with Germany's two-year yield reaching its lowest level since March 5.

Wall Street futures are in the red. S&P 500 futures fell 0.1%, and Nasdaq Futures dropped 0.3%.

Investors fear that the tariffs will harm growth and increase inflation in the United States.

Investors sought out gold as a safe haven. Last up by 1.1%, it was $3,052.04 per ounce.

Goldman Sachs raised its gold price forecast on Wednesday, citing stronger-than-expected ETF inflows and sustained central bank demand.

Trump has said that he might give Beijing a reduction in tariffs in order to reach a deal to sell TikTok. This app helped Chinese stocks outperform Asian trading.

Shigeru Shiba, the Japanese Prime Minister, said that all options are on the table. Canada could impose retaliatory tariffs. The European Union is seeking to negotiate solutions.

Trump announced plans to impose reciprocal duties on all countries, on the 2nd of April. He called this "Liberation Day." Trump stated on Thursday that these tariffs would be "lenient."

We all know the markets do not like uncertainty, and we face it in all areas at this time. Baylee wakefield, multi-assets portfolio manager at Aviva Investors, said that the markets will be trading based on sentiment until next week's announcement.

The dollar index was down about 0.3% to 104.29. Overnight, the euro fell to a low of $1.0731 for the first time in three weeks. It then recovered and traded up 0.4% during the day.

Chris Turner, ING's global director of markets, wrote in a report that the market may be dealing with tariff fatigue. Aside from being already priced in, it is possible the tepid reaction was due to Trump's suggestion that the reciprocal tariffs next week could be quite lenient.

The benchmark 10-year Treasury Yield gained 5 basis points to trade at 4.3886 percent.

The oil prices dropped due to concerns that more tariffs could hurt the global economy and reduce demand. Brent crude futures dropped 0.2%, to $73.61 per barrel. U.S. West Texas Intermediate futures also fell 0.2%, to $69.49. (Reporting and editing by Tomaszjanowski and Bernadettebaum; Additional reporting by Stella Qiu, Jiaxing LI and Elizabeth Howcroft)

(source: Reuters)