Auto stocks shift gears on tariffs

One of the more interesting market developments on Thursday was the behavior of certain auto-industry stocks after the White House announced 25% tariffs on all non-US vehicles.

The declines in stocks like General Motors (GM) and Toyota (TM) appeared to make sense, given GM manufactures many of its vehicles (or parts of them) in Canada, Mexico, and China, while Toyota builds most of its vehicles outside the US.

However, some of Thursday’s biggest moves in the auto space occurred in car rental companies Hertz (HTZ) and Avis Budget (CAR), with the latter stock jumping more than 26% intraday:

Even if yesterday’s move had been smaller, it would have been notable, given CAR had recently fallen to its lowest level in more than four years. Even after yesterday’s rally, the stock was down roughly 33% from its early-December highs.

The “logic” behind the moves is that higher auto prices could fuel demand for car rentals,¹ as well as increase the value of these companies’ fleets, which are a major source of inventory for the used-car marketplace.

But this catalyst didn’t necessarily play out consistently across the different types of auto stocks. For example, used-vehicle stocks Carvana (CVNA) and Vroom (VRM) were only modestly higher and lower, respectively.

This apparent discrepancy aside, there may have been a more basic issue that was being overlooked with regard to yesterday’s moves in HTZ and CAR.

As noted in “Metals, miners, and momentum,” there’s a high level of uncertainty about which tariffs may be implemented, how long they may be in effect, and what exceptions may be available to different companies and countries. Last month Morgan Stanley & Co. strategists were skeptical that rigid 25% auto tariffs would be enforced on a long-term basis.² More recently, analysts pointed out that the April 2 tariff deadline was more likely to be a starting point for ongoing trade negotiations than an uncrossable line in the sand.³

As the saying goes, markets dislike uncertainty, and there’s very little certain now about tariffs. That could make some price moves based on them susceptible to their unexpected twists and turns.

Market Mover Update: Soleno Therapeutics (SLNO) jumped more than 40% intraday after receiving Food and Drug Administration approval for a drug designed to treat a rare disorder that produces abnormal hunger (see “Volatility heads-up”).

Copper prices pulled back more than 2% Thursday after posting back-to-back all-time highs, while gold hit its first record high since last week, with April futures (GCJ5) trading as high as $3,071.30.

Today’s numbers include (all times ET): Personal Income and Spending (8:30 a.m.), PCE Price Index (8:30 a.m.), Consumer Sentiment (10 a.m.).

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¹ Reuters. Car rental firms Hertz, Avis zoom as tariffs seen hurting new-vehicle demand. 3/27/25.
² MorganStanley.com. What Tariffs Could Mean for Markets. 2/7/25.
³ MorganStanley.com. Key Indicators of How Far Markets Could Rebound. 3/24/25.