Keeping Brent selling position open to level of 69.0

Donald Trump has signed the executive order for 25% duties on automobile imports, significantly escalating the ongoing trade war. The president is also paving the way for next week’s even more sweeping trade duties. 

The tariffs are set to come into effect on April 2, with the US starting to levy them a day later. Trump’s statement, released later on Wednesday, says that the automobile tariffs will be charged right after midnight, at 12:01 a.m. Washington time on April 3. 

The White House states that the tariffs will be applied not only to fully assembled cars but also to key car parts, including engines, transmissions, transmission parts and electronic components. The tariffs on automobile parts will go into effect no later than May 3. The list may expand over time to cover additional parts. 

Trump calls the tariffs “permanent” and says he is not interested in discussing any exceptions. General Motors, Ford Motors and Stellantis NV faced an immediate decline in their stock. Asian automakers led by Toyota Motor dropped in early trading today.

Duties on automobile imports represent a substantial escalation of trade war and are likely to hamper the largest car brands both in the US and in such countries as Japan, Germany and South Korea, all of which are major US trading partners. The move brings risks of disrupting North American automakers that rely on highly integrated supply chains between the US, Mexico and Canada. 

Additional duties will drive production prices and automobile costs in the US up, which will ultimately narrow the options for consumers and result in job losses in the auto industry in the US and other countries.

The rise in prices of new cars and spare parts will lead to a contraction of the passenger transportation and freight road transportation. It will inevitably reduce the demand for gasoline and diesel fuel. According to various estimates, between 57% and 65% of crude oil is used for the production of motor fuel. The scenario of a sharp contraction in oil demand may give additional bearish momentum to oil prices, which are already under pressure.

The overall recommendation is to sell Brent oil.

Profits should be taken at the level of 69.0. A Stop loss could be set at the level of 76.0.

The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.