Auto ETFs Surge On Trump's Tariff Reprieve, But Uncertainty Looms

President Donald Trump's one-month exemption on auto tariffs for Mexico and Canada sent ripples through the sector.

While the broader market rallied on the news, auto stocks lifted the ETFs that have significant exposure to the industry. However, this exemption is temporary. With Trump's broader tariff plan set to take effect soon, investors are closely watching how these policy moves will shape the future of auto-related ETFs.

ETFs In Focus The Tariff Delay

The exemption news boosted shares of major automakers:

Ford F, 5.3%,
Stellantis STLA, 9.1%,
General Motors GM, 7.7%.

Naturally, ETFs carrying these stocks saw strong movement as well. Here are three auto-focused ETFs that reacted positively to the announcement:

Global X Autonomous & Electric Vehicles ETF DRIV closed up 3.92%; This ETF holds a diversified basket of stocks engaged in the electric and autonomous vehicle space, including Ford and General Motors. With GM pushing deeper into EV technology and Ford ramping up production, DRIV saw an uptick following the tariff delay.

First Trust Nasdaq Global Auto Index Fund CARZ was up 2.86% at closing; This ETF, one of the most direct plays on the global auto industry, benefited from the surge in Stellantis, GM, and Ford. The ETF's holdings span traditional and electric automakers, making it a go-to choice for investors looking for broad auto sector exposure.

SPDR S&P Kensho Smart Mobility ETF HAIL up 3.76% at closing; HAIL focuses on companies involved in innovative transportation, including automakers and auto tech firms. With a portfolio that includes GM and Ford, it saw a bump from the tariff extension and will likely remain volatile as trade policies evolve.

Also Read: Warren Buffett Calls Tariffs ‘An Act Of War,’ Warns They Function As A Tax On Goods Amid Market Turmoil

Breaking Down Trump's Tariff Plan

The White House's announcement, delivered by Press Secretary Karoline Leavitt, confirmed that the administration is granting a temporary exemption for cars coming through the USMCA trade agreement, as reported by CNN. Trump reasoned that it was to give major U.S. automakers time to shift production stateside, aligning with his broader "America First" economic strategy.

While the exemption is good news for now, reciprocal tariffs are still slated to take effect on April 2, said Leavitt. Trump has made it clear that he wants automakers to start investing in U.S. production rather than relying on imports. The uncertainty surrounding these upcoming tariffs has left many businesses in limbo, with some fearing that increased costs could ripple through supply chains and impact overall profitability.

Meanwhile, Canada isn't pleased. Ontario Premier Doug Ford and Canadian Prime Minister Justin Trudeau have taken a firm stance against any auto tariffs, arguing that trade between the two countries should remain unhindered. Despite this pushback, Trump remains unwavering in his tariff plans, signaling that more trade battles could be on the horizon.

What's Next For Auto ETFs?

With Trump's broader reciprocal tariff policy looming, auto-focused ETFs remain in a delicate position. A full-fledged trade conflict could disrupt supply chains and drive up costs for automakers, negatively impacting the ETFs that hold them. However, if the administration softens its stance or extends the exemption further, these ETFs could continue to see gains.

Investors should stay tuned as the situation develops. For now, the one-month reprieve offers a temporary tailwind.

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