Weekly Research Briefing: Ugly Quarter

The US last year imported roughly half of the vehicles sold in the country. With President Donald Trump now set to impose a 25% surtax on autos — and major parts — economists and industry analysts alike are rushing to sketch out the implications... will the 47% of the market that’s now made up of imports move onshore? This isn’t a flip-of-the-switch sort of thing. Moving final assembly, let alone full supply chains, is a multi-year process.

Even for Ford and General Motors, which, according to UBS analysts including Joseph Spak, have excess capacity in the US, the issue isn’t such a quick and easy call.

The duo could “eventually” move production of some vehicles currently made in Canada and Mexico to the US, the UBS team wrote. But, “that capacity is not tooled to make those vehicles. So, some potential capital investment might be needed for tooling, and this could take time.”

@wallstengine: U.S. auto dealers are sitting on a 2–3 month supply of new cars, but Morgan Stanley says once that clears, tariffs could push vehicle prices up 11% to 12% starting in May.

After speaking to auto industry experts from the U.S., Europe, and Asia, Wedbush concluded President Trump’s 25% tariff on all cars and parts made outside the U.S. “would send the auto industry into pure chaos.” The move will raise the average price of cars between $5,000 on the low end and $10,000-$15,000 on the high end, the firm tells investors in a research note. Wedbush believes every auto maker in the world will have to raise prices selling into the U.S. while the supply chain logistics of the tariff announcement is “hard to even put our arms around at this moment.” A U.S. car with all U.S. parts made in the U.S. “is a fictional tale not even possible today,” according to the firm.

Wedbush thinks it would take three years to move 10% of the auto supply chain to the U.S. and cost hundreds of billions “with much complexity and disruption.” It adds, “The concept of this auto tariff in our view would be a back breaker and Armageddon for the auto industry globally and throws the supply chain into pure panic mode.” Wedbush believes the winner from these tariffs “is no one.” Even Tesla will be hit and will be forced to raise prices, the firm predicts.

@wallstengine: JPMorgan estimates tariffs could cost General Motors $GM up to $14 billion—pretty much wiping out all of its global profits. For Ford $F, the impact is estimated around $6 billion, which would eat up about 75% of its global profits—assuming the full weight of the tariffs falls on the automakers.

President Donald Trump’s tariffs on automobile imports set to take effect next week are expected to drive up costs across the industry, raising sticker prices by thousands of dollars. The effects could be particularly pronounced at the low end of the market, with many of the least-expensive models from the likes of General Motors Co., Ford Motor Co., Kia Motors and Hyundai Motor Co. being built outside the US.

“It’s going to be a real struggle for those buyers,” said Erin Keating, executive analyst at researcher Cox Automotive. “We only expect prices to rise and incentives will go away. Some vehicles could go away.”

A shiny new car in the driveway is a rapidly disappearing piece of the American dream alongside an affordable home. The average price of a new car in the US now approaches $50,000, with high interest rates adding to the financial toll.

There are 20 models on the market priced below $30,000, according to Cox, and at least half of them will be hit severely by the new tariffs. Among the vehicles assembled in Canada or Mexico, costs would rise by $5,855 on average, it estimated in a recent research report.

“The impact on ‘affordable’ vehicles would likely make many of them unviable in the US market,” Cox said in the report...

The bargains in the cheap-car market could end up being from Honda Motor Co. and Toyota Motor Corp. The roughly $28,000 Honda Civic hatchback is made in Indiana. Toyota builds its Corolla compact in Mississippi and starts at about $23,000.

Manufacturing executives said the U.S. doesn’t have the plants to churn out the amount of steel wire or screws and other fasteners needed to displace imports. “The production capacity we need doesn’t exist here in the U.S.,” said Gene Simpson, president of Illinois-based fastener maker Semblex. “It’s a select group of suppliers.”

And companies that use screws and other metal parts covered by tariffs say their customers won’t tolerate price increases. Some construction contractors may delay projects until they get a handle on how to blunt the effects of import duties.

About $178 billion of steel and aluminum products imported by the U.S. last year are now subject to a 25% tariff, according to Jason Miller, a supply-chain management professor at Michigan State University. That is more than three times greater than the import products affected by the original 2018 tariffs.

“It’s a shockingly large number of parts,” said Miller. “The scope of the metal tariffs is so much broader than what you would have first thought.”

The North American uranium market is grinding to a halt as US nuclear-power companies spooked by President Donald Trump’s tariff threats slow purchases and delay new contracts.

US utility purchases of the nuclear fuel dropped by half as the imposition of Trump’s 10% levy on Canadian energy exports approaches, according to the most recent data from pricing firm TradeTech. Reactor operators who typically rely on term contracts are standing on the sidelines to see how the tariffs play out.

Few sectors are as at-risk as US nuclear power, which relies on Canada for more than one-fourth of its uranium — more than any other source. Uncertainty about the scope and duration of levies, set to kick in on April 2, has discouraged buyers of the reactor fuel. It’s also setting the stage for additional market dislocation when nuclear operators eventually begin to exhaust inventories.

The turmoil complicates decision making for utility executives trying to balance expansion plans with conflicting signals on electricity demand for data centers...

“In the absence of any clarity, and with the rules constantly changing — tariffs on today, tariffs off tomorrow — it’s just created this complete paralysis,” said John Ciampaglia, chief executive officer at Sprott Asset Management, which operates the world’s largest physical uranium trust. “There are just too many ‘what-if’ scenarios the market is trying to digest at once.”

The president has pledged to usher in a new era of American fossil fuel dominance and cheaper oil, saying a fall in energy prices will help beat back consumer inflation.

But shale executives told a survey by the Federal Reserve Bank of Dallas that the president’s trade policies and rhetoric were now threatening their drilling plans.

“The administration’s chaos is a disaster for the commodity markets. ‘Drill, baby, drill’ is nothing short of a myth and populist rallying cry,” one shale producer wrote in a submission to the Dallas Fed. “Tariff policy is impossible for us to predict and doesn’t have a clear goal. We want more stability.”

“The keyword to describe 2025 so far is ‘uncertainty’ and as a public company, our investors hate uncertainty,” wrote another shale executive. Another said the policy risks suggested it was time to hit the “pause button” on upstream spending...

“I have never felt more uncertainty about our business in my entire 40-plus-year career,” wrote one producer in the survey.

@rickylongthread.bsky.social‬: Canadian government billboard ad in Georgia (U.S. state).

For the second time in less than a month, we are raising our tariff assumptions. We now expect the average US tariff rate to rise 15pp in 2025—our previous “risk case” and 5pp more than our previous baseline. Almost the entire revision reflects a more aggressive assumption for “reciprocal” tariffs. We expect President Trump to announce reciprocal tariffs that average 15% across all US trading partners on April 2, although we expect product and country exclusions to ultimately whittle the addition to the average US tariff rate down to 9pp. Higher tariffs are likely to boost consumer prices, and we have lifted our yearend 2025 core PCE inflation forecast by 0.5pp to 3.5% year-on-year.

@LizAnnSonders: March @DallasFed Manufacturing Index fell to -16.3 vs. -5.0 est. & -8.3 prior … new orders up to -0.1 (-3.5 prior); production up to +6.0 (-9.1 prior); shipments up to +6.1 (+5.6 prior); wages down to +16.0 (+16.7 prior) … employment down to -4.6 (-0.7 prior)

‬‪“Consumers are spending less due to increased concerns about inflation and the economy,” Chief Executive Calvin McDonald said. “This is manifesting itself into slower traffic across the industry in the U.S. in quarter one, which we are experiencing in our business as well.”

@NewsLambert: The number of completed but unsold single-family homes has reached its highest level since July 2009. There's growing slack in the new construction market.

Slower earnings growth: Higher tariffs, weaker economic growth, and greater inflation than we previously assumed lead us to cut our S&P 500 EPS growth forecasts to +3% in 2025 (from +7%) and +6% in 2026 (from +7%). Our new EPS estimates are $253 and $269. These estimates are below both the top-down strategist consensus (+9% and +9%) and the bottom-up consensus of equity analysts (+9% and +14%).

BoA (Hartnett): "US household holdings of US stocks ($38tn) at record 29% of financial assets (Chart 5), exceeding prior peaks in 1968 & 2000; 10-year annualized S&P 500 returns following 1968 (3.5%) and 2000 (-0.4%) were v poor."

The superior performance of U.S. investments over the past decade-plus has been a giant magnet for the world’s money. Foreign investors own almost 20% of all U.S. equities compared with 7% at the start of this century, Goldman Sachs data shows. The bets generated years of windfall profits, making up for dreary returns on offer in many overseas markets.

Now, foreigners are racking up losses as the so-called American exceptionalism trade sputters. The Trump administration’s tariff whiplash, doubts about the U.S. artificial-intelligence trade, and recession fears have rattled U.S. markets this year, even as European ones have rallied.

The selloff could prove temporary. But it is stoking concern that if U.S. markets really were to crater, the collateral damage would be profound.

“You’ve got an enormous global concentration in U.S. financial markets,” said Brad Setser, senior fellow at the Council on Foreign Relations and a former U.S. Treasury Department official. “Investors are taking an increasingly big risk.”...

“Looking back in history at episodes when concentration was so high, it always ends,” said Torsten Slok, chief economist at Apollo Global Management. “The finance textbook is clear: You should simply not allow your U.S. share to grow so big.”

The S&P 500 Index has shed 5.1% this year, trailing the MSCI All Country World Index excluding the US Index’s 6.5% gain. That’s the widest gap in any quarter since 1988, according to data compiled by Bloomberg...

It’s a stunning reversal for investors to process. The S&P 500 entered 2025 coming off two consecutive years of 20% gains, the first time that’s happened this century. But the boom left positioning stretched, valuations pricey and the market vulnerable. With global risks suddenly amplified, traders are seeking safe areas to hide out, putting S&P 500 and the Nasdaq 100 Index on track for their worst quarters since 2022.

‪@carlquintanilla.bsky.social‬: ".. Corporate spreads have finally given up the ghost. .. We have gone from some tranches have 10X times oversubscribed to now as low as 1x. .. In the last 40 days we have seen IG CDX go from 45.6 to 63.4 now, that is 36% wider." (NatAlliance/Brenner)‬‬‬

To economists, the policies threaten to undermine U.S. competitiveness in emerging areas like artificial intelligence, and to leave Americans as a whole poorer, less healthy and less productive in the decades ahead.

“Universities are tremendously important engines of innovation,” said Sabrina Howell, a New York University professor who has studied the role of the federal government in supporting innovation. “This is really killing the goose that lays the golden egg.”

Scientists have warned that the United States risks losing its status as a leader in cutting-edge research and its reputation as a magnet for top scientific minds from around the world.

Already, labs across the country have begun laying off workers and canceling projects — in some cases stopping clinical trials that were already underway — and top universities including Harvard and the University of Pennsylvania have announced hiring freezes. France and other countries have begun recruiting American scientists, promising a more welcoming environment.

Economists across a broad ideological spectrum argue that investments in scientific research — especially the kind of fundamental, early-stage research that is too risky to attract private investors — are among the most efficient uses of taxpayer dollars. Research has found that every dollar invested in research and development returns about $5 in economic gains, a figure that likely understates the true return because it doesn’t account for benefits that aren’t captured in measures of gross domestic product, like longer lives and increased leisure time.

CoreWeave Inc., the cloud-computing provider that was targeting a $4 billion blockbuster IPO just weeks ago, raised $1.5 billion in a deal that was walked down by 40% from the midpoint of the range its bankers pitched to investors last week. The company ended Friday with a diluted valuation of $23 billion, roughly in line with its last funding round but short by a third of its initial target of more than $35 billion.

That’s not how Wall Street wanted this to go.

There was never a golden age of IPOs, but some of the greatest companies went public early, rewarding investors willing to take the risk. The IPO marked not just a fundraising event but a cultural milestone, a corporate coming-of-age ritual, a chance to shine or stumble. An entire ecosystem — equity capital markets originators, syndicate desks, salesforces, research analysts, portfolio managers, buy-side analysts — grew around it, a symbiotic dance of capital and opportunity.

It wasn’t perfect but it was the best finance show in town.

Over time, the process has soured. Investment banks, eager to win deals, overpromise on valuations, inflating client expectations. This isn’t new, but it feels like it has become more pronounced. Meanwhile, the explosion of private capital, driven by low interest rates and other advantages, has made public markets less attractive. Companies no longer need IPOs to fund growth; they turn to them when they’re out of options.

CoreWeave isn’t alone in its struggles. Earlier this year, Venture Global, a liquefied-natural-gas exporter, tried to cash in on Europe’s energy crisis and excitement over Donald Trump’s election by seeking a nosebleed valuation. Investors weren’t fooled. The company reduced its valuation by more than 40 per cent to get the IPO out the door, only for the shares to plunge almost 60 per cent in the after-market. Like CoreWeave, it had glaring red flags: massive litigation, huge execution risks, and a valuation propped up by temporary price spikes.

These aren’t the kinds of companies that should be leading an IPO revival. Ideally, thoroughbred companies would lead the charge, much like Google’s 2004 debut following the dotcom collapse (the IPO priced below the range but traded well in the after-market) or AIA’s 2010 offering after the financial crisis. Instead, the market’s reopening features firms unable to secure private funding, desperate for cash to survive, or banking on investors overlooking their shortcomings in favour of hot trends.

The public markets risk becoming a dumping ground. When the best assets are hoarded by private equity firms, venture capitalists, sovereign-wealth funds, and family offices, the IPO market gets the leftovers. As FTAV wrote on Thursday, CoreWeave, for all its AI hype, has massive debts, huge capex requirements, mounting losses, rapidly depreciating assets, a slew of related-party dealings, and a significant dependence on just two customers (Microsoft and Nvidia). Yet here it was, looking for public investors willing to take the plunge. CoreWeave is seeking public investment not from a position of strength, but out of necessity.

Flashy megamergers that generate blockbuster fees for dealmakers have remained few and far between, but plenty of relatively smaller buyouts valued at a few billion dollars are still happening. Outside the U.S., dealmakers have been on a spree relative to last year, especially in Europe and Asia...

The biggest deals—those valued at $10 billion and more—are down 28% by value globally through the first quarter, compared with the year-ago period... But relatively smaller deals are having their best start to the year since the 2021 pandemic-era M&A boom. Total deal value for transactions in the $1 billion to $10 billion range is up 38% from a year earlier through March 28, according to data from London Stock Exchange Group. The number of deals is up nearly 31%...

Worldwide, overall deal activity in the first quarter increased 3.9% from a year ago, according to LSEG. But where deals are happening has shifted. Deals of any size where the company being acquired is in the U.S. saw an 18% drop in value in the first quarter. Deals where the acquiring company was in the U.S. fell by a similar amount...

Dealmaking in Europe and Asia-Pacific has jumped so far this year, rising 8.4% and 5.2% from last year, respectively, though remaining well below 2021 levels. (LSEG categorizes deals by where the target company is based.) Cross-border M&A, where the acquirer and target company are in different countries, accounted for 36% of deal value so far this year, up from 26% a year ago.

Airlines are having to revamp their plans ahead of the peak summer travel season as Canadians avoid trips to the United States amid an escalating trade war between the two neighbors.

A grass roots effort by Canadians to boycott all things American — from U.S. grocery products and alcohol to tourist hot spots — had already set off alarms across the United States travel industry, which warned of multibillion-dollar losses.

Now, about two months since President Trump took office and launched an attack against Canada’s economy and its sovereignty, the fallout from Canadians’ resulting anger is becoming clearer.

Canadian airlines are eliminating tens of thousands of seats to the United States this April, a peak period when Canadians travel to warmer destinations. The reductions range from 7 percent by Air Canada to 25 percent by Flair Airlines, a discount airline, according to Visual Approach Analytics, an aviation research company...

OAG Aviation Worldwide Limited, an analytics company based in the United Kingdom, said advance bookings for routes between Canada and the United States from April through October are down by roughly 70 percent, compared with the same time period last year...

Florida is the destination feeling the greatest effect from the reduction in seats on flights from Canada, the report from Visual Approach Analytics said, with airports in Fort Lauderdale, Fort Myers and Orlando seeing up to a 30 percent cut in April.