Investing.com -- Auto stocks moved lower premarket Wednesday following a CNN report suggesting that President-elect Donald Trump is considering declaring a national economic emergency to implement a new tariff program.
Shares in major automakers General Motors (NYSE:GM), Ford (NYSE:F), Tesla (NASDAQ:TSLA), and Stellantis (NYSE:STLA) initially fell, while electric vehicle (EV) startups also saw declines, with Rivian (NASDAQ:RIVN) and Lucid (NASDAQ:LCID) down 1.3%. Chinese EV companies were hit harder, as Nio (NYSE:NIO) and XPeng (NYSE:XPEV) fell 3%, and Li Auto (NASDAQ:LI) 2%.
The CNN report, which cites four sources familiar with the matter, says Trump is exploring the use of the International Economic Emergency Powers Act (IEEPA) to unilaterally impose tariffs on imports. This law provides the president with broad authority to manage trade during a national emergency without needing to prove national security risks.
The news sparked investor concern. Several chipmakers experienced losses, including Cirrus Logic (NASDAQ:CRUS), which declined 1%, Marvell (NASDAQ:MRVL) Technology by 0.8%, Lam Research (NASDAQ:LRCX) by 0.4%.
According to CNN, the Trump team is also evaluating other legal avenues, such as section 338 and section 301 of U.S. trade law, which could allow for additional tariffs. However, they added that these options would require longer processes and potentially face legal challenges.
Market reactions reflect fears that new tariffs could disrupt global supply chains and increase costs for automakers and tech companies. The proposed tariffs are part of Trump’s broader strategy to reset the global balance of trade and bolster U.S. manufacturing.
Reacting to the report, analysts at Vital Knowledge said the headline "sounds negative, but it doesn’t really tell us anything that’s all that incremental."
"Investors know there will be some type of tariff increase and the process for imposing them necessitates this type of declaration. We still don’t know the scope – what products/countries will be hit, what will the tariff rate be, what is the timing, etc," wrote the firm.
The firm also believes that the Washington Post report from earlier in the week "isn’t inaccurate" and that "tariffs won’t be as draconian as was talked about on the campaign trail."
Nevertheless, they believe "some new ones will be implemented and (more importantly) Trump will continue to use the topic as a negotiation cudgel, which means the threat can never be removed from the table."