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Investing.com - A potential increase in average tariff rates by President Donald Trump next week could equate to roughly to as much as a 6% decline in income for U.S.-listed stocks, according to analysts at Citi.
In a note to clients, the brokerage predicted that Trump’s anticipated tariff announcement on April 2 -- an event he has called "liberation day" -- will lead to an uptick in average levies on U.S. imports of around 10% to 15%, even as the analysts expect the White House to roll out "plenty of country-specific" exceptions.
A rise at the lowest end of this range would translate to between a 5% to 6% drop in earnings per share for U.S. equities, the Citi strategists said.
They added that a similar jump would lead to a 1%-2% decrease in per-share profit for European stocks as well, although markets have "priced" in the dip "absent a more severe scenario."
Speaking at the Oval Office on Wednesday, Trump said a plan to institute sweeping levies matching tariffs charged by foreign countries would likely be lower than initially anticipated.
However, he announced 25% levies on automotive imports into the U.S., following through on a promise to penalize overseas manufacturers of cars and trucks. The statement appeared to exclude possible carve-outs for Mexico and Canada, two countries that play a pivotal role in the process of car construction in North America and have a free-trade agreement with the U.S. that was signed during Trump’s first term in office. Shares in American automakers, including Ford, General Motors (NYSE:GM), and Jeep-parent Stellantis (NYSE:STLA), sank in premarket trading on Thursday.
The auto tariffs, like the White House’s so-called "reciprocal" levies, are due to take effect on April 3, the Trump administration has said.
"The tariffs are coming," the Citi analysts said. "April 2nd is expected to deliver some clarity on the U.S. reciprocal tariff policy. While providing incremental information there will be residual implementation and negotiation uncertainty in our view."