On February 18, 2025, at a press conference at his Mar-a-Lago estate in Florida, Donald Trump made a surprise announcement that a 25% tariff would be imposed on imported automobiles starting April 2, emphasizing there would be “no exemptions.” This move not only continues the ‘America First‘ tone of his trade policy but is also seen as a key signal of a re-escalation in the U.S.-China trade war. Following the news, international gold prices surged 2.6% in a single day, breaking the historic high of $2,600 per ounce, while the Chinese stock market faced a battle to defend its trillion-dollar market capitalization line, with market risk aversion heating up dramatically. This article will provide an in-depth analysis of the impact and subsequent developments of this event from three dimensions: policy context, market reaction, and global economic linkage.
Trump’s latest tariff threat is both a continuation of his 2018 trade war strategy and a reflection of the structural contradictions in the current international economic and trade landscape.
According to the latest statement, Trump plans to implement a 25% tariff on imported automobiles on April 2, covering both complete vehicles and core components, and will cancel the duty-free quotas for existing trade partners. This measure is seen as an extension of the steel and aluminum tariff executive order signed on February 10, 2025 (also imposing a 25% tariff). Both policies emphasize “reciprocal tariffs” aimed at reducing the U.S. trade deficit. It is noteworthy that the automotive industry chain involves major economies such as the European Union, Japan, and Mexico, and its ripple effect will far exceed that of the previous steel and aluminum tariffs.
Looking back at the 2018 U.S.-China trade war, the Trump administration used the “Section 301 investigation” as a pretext to impose tariffs on Chinese goods, ultimately leading to mutual tariffs covering over $500 billion worth of goods. Although this time the auto tariff does not directly name China, as the world’s largest auto exporter (with 5.5 million units exported in 2024), China could still be impacted through roundabout trade in the supply chain. Furthermore, Trump has recently mentioned imposing “reciprocal tariffs” on sectors like “chips and pharmaceuticals,” suggesting the scope of the trade war could expand to high-tech industries.
Traditional allies like the European Union, Canada, and Japan have already expressed their opposition. The German Association of the Automotive Industry (VDA) warned that this move would cause a 6%-8% increase in domestic car prices in the U.S. and trigger retaliatory measures. China’s Ministry of Foreign Affairs has called for “opposition to unilateralism” but has not announced specific countermeasures, indicating a strategic shift towards “stabilizing the domestic market through internal demand.” The International Monetary Fund (IMF) has gone further, predicting that if the tariffs are fully implemented, global GDP could shrink by 0.8% in 2025.
As a traditional safe-haven asset, gold has shown strong performance amidst this tariff crisis.
According to the spot price on the London gold market, the price of gold reached $2,685 per ounce on February 20, 2025, surpassing the previous high of $2,531 in October 2024, with a year-to-date increase of 19%. Historically, this rally is similar to the one during the initial COVID-19 outbreak in 2020 (a 24.4% annual increase) and the 1970s oil crisis (a 133.4% annual increase), both reflecting capital flight to safety amid systemic risks.
In addition to the trade war, heightened tensions in the Middle East and the diversification of foreign exchange reserves by central banks worldwide (with net gold purchases reaching 1,250 tons in 2024) have also pushed gold prices higher. Notably, the People’s Bank of China has increased its gold holdings for 18 consecutive months, with its reserve share rising from 2.4% in 2018 to 4.9% in 2024, reflecting a deepening of its ‘de-dollarization‘ strategy.
From a technical analysis perspective, with gold prices breaking above $2,600, a bullish trend has been established, and speculative net long positions have increased to their highest level since 2021. Analysts predict that if the Federal Reserve delays interest rate cuts due to inflationary pressures caused by the tariffs, the price of gold could further challenge the $2,800 mark.
China’s A-share market is facing a battle to defend its market capitalization under the threat of tariffs, with the trillion-yuan market cap indicator becoming a watershed for bulls and bears.
As of January 2025, there were 11 companies in the A-share market with a market capitalization exceeding one trillion yuan, including ICBC (2.35 trillion) and Kweichow Moutai (1.84 trillion), collectively accounting for 23% of the total market capitalization. These “giants” are mostly state-owned enterprises and consumer leaders, crucial for index stability. However, their average foreign ownership is only 3.2%, making them vulnerable to shocks from international capital flows.
32% of China’s auto parts export value goes to the United States. If the tariffs are implemented, the revenue of related companies could shrink by 15%-20%. Core industries of “Made in China 2025,” such as semiconductors and machinery, also face the risk of technology blockades, and the overseas expansion plans of companies like CATL (market cap of 1.12 trillion yuan) could be hindered.
China Securities Finance Corporation has net-purchased ETFs for two consecutive weeks, totaling 12 billion yuan. The Ministry of Finance is accelerating the issuance of special bonds, with a focus on supporting new energy vehicles and digital infrastructure. The market anticipates that if the Shanghai Composite Index falls below 2,800 points, a “market rescue package,” including reserve requirement ratio cuts and stamp duty reductions, may be rolled out.
The “boomerang effect” of Trump’s tariff policy is becoming apparent. A model from the Peterson Institute for International Economics (PIIE) shows that comprehensive tariffs would reduce U.S. GDP by 0.4% in 2026, increase the inflation rate by 0.6%, and cause the unemployment rate to rebound by 2028. More seriously, the restructuring of global supply chains could drive up manufacturing costs, weakening the post-pandemic recovery momentum.
Trump’s tariff threat is not just a tool for his political mobilization; it also reveals the power vacuum in an era of de-globalization. Market volatility has become the new normal, and investors need to discern underlying structural trends amidst the short-term noise. The record-breaking gold prices and the trillion-dollar market cap defense of the Chinese stock market reflect a fierce clash between economic nationalism and multilateralism, highlighting the complexity and uncertainty of the current international economic environment.
The primary impact will be on complete vehicles and auto parts (of which 32% of China’s exports go to the U.S.), as well as supply chains for semiconductors and machinery. Domestic U.S. car prices could rise by 6%-8%, potentially triggering global retaliatory tariffs.
A combination of geopolitical risks (trade wars, Middle East conflicts), central bank purchases for “de-dollarization” (e.g., China doubling its reserve ratio), and expectations of a delayed rate cut by the Federal Reserve are collectively supporting the bull market for gold.
