MW Investors are selling auto bonds in wake of Trump's tariff plan for vehicles

By Joy Wiltermuth

Uncertainty around tariffs has begun to rattle credit markets

Uncertainty around President Donald Trump's tariffs has begun to rattle credit markets as investors are no longer taking a wait-and-see approach to the shifting policy landscape from the White House.

Auto bonds issued by major U.S. automakers have been hit by selling pressure in the final full week of March, increasing after Trump announced plans to apply 25% tariffs soon on vehicles not made in the U.S.

The following chart shows the recent rise in spread levels on select bonds issued by Ford Motor Co. $(F)$, General Motors Co. $(GM)$ and Stellantis $(STLA)$, the company formed in 2021 by the merger of Fiat-Chrysler and the French maker of Peugeot vehicles.

"The autos certainly have taken it on the chin," said Cindy Beaulieu, a portfolio manager at Conning, which ended 2024 with about $123 billion in assets under management.

There's still a lot of uncertainty that remains until the "first tariff is stamped" on any vehicle, including whether they spark any trade retaliation, according to Beaulieu. But while auto bonds have come under pressure, there's "a fair amount of complacency" in the broader corporate bond market, where spreads remained relatively calm, she said.

Spreads are the extra compensation investors earn above risk-free rates to help compensate for market volatility and default risks. Rising spreads also point to increased borrowing costs for U.S. companies, which can dig into profitability.

The selloff in auto bonds comes as concerns pick up around how major companies and consumers might manage the costs of Trump's planned tariffs, with April 2 pegged by the White House as a deadline for "reciprocal tariffs."

Read: Should you buy a car now to avoid tariffs? That strategy has one big potential roadblock.

Policy uncertainty under Trump's second term has been running high, with potential negative implications for an already slowing U.S. economy. Those jitters already led to a correction in the stock market earlier this month, defined as a drop of at least 10% from a recent peak.

The S&P 500 index SPX also was on pace for a 5.8% drop in March alone, while the Nasdaq Composite Index COMP was down 7.4% on the month through Friday, according to FactSet.

Here's another chart from BondCliQ showing the pickup in selling in the same auto names since the tariffs were announced this week.

But beyond autos, the broader investment-grade U.S. corporate bond market appears relatively steady, with spreads still near historical lows at about 91 basis points over Treasurys.

Shares of Ford were down about 3% on the week through Friday, while those of GM were 7.2% lower and Stellantis were off by 4.2%, according to FactSet. Calls for comment were not immediately returned.

-Joy Wiltermuth

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March 28, 2025 12:31 ET (16:31 GMT)

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