The Ripple Effects From Auto Tariffs… And The Next Move In Energy 3/27/25

0:00And live from the Nasdaq market site right here in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap. Trump's take on tariffs taking a toll on a big chunk of the automakers today. But could the effects be felt even more broadly? Or has the market completely overreacted? Because oil and energy are actually up this month. But if things are about to slow, is now the time to sell? Paul Sankey says he's ignoring all this. And he'll give you his take. Plus, Lulu looks like it's putting on a lemon on guidance. Another big AI name decides to go public, and Robinhood has all growns up, and it's all growns up.

0:39But can the millennial trading app lure in the boomers' big bucks? As Guy Adami might say, that's a lot of show, and I'm here for it. I'm Brian Sullivan, in for Melissa Lee tonight, coming to you live from Studio B at the NASDAQ. On your desk tonight, Tim Seymour, Karen Feinemann, Bono and Eisen, and Steve Grasso. Welcome, everybody. Welcome, Sol. You're a lot of man. There we go. It's a lot of show. All right, we are going to start this hour in the same place that you guys ended last night. That, of course, tariffs. Motor City stocks got rocked today. GM and Ford, the auto parts makers, all down.

1:13In fact, GM, the worst performer in the S &P 500 today. We're going to get more on all this and autos in a flash. But keep in mind, it was not just the auto stocks that took a hit. Many big pharma companies also selling off as the president signaled they could be the next industry to be targeted. Overall, the macro markets, yes, they were down today, but not by that much. So before we get to the trade, let's get you caught up on the actual news. Megan Casella in D.C. trying to follow. I mean, it's a 24-hour job, Megan, but somebody has to do it. Somebody has to do it, Brian. We are doing our best to stay on top of every twist and turn.

1:54So first on autos, the White House emphasizing today that these new tariffs on cars and on car parts will stack on top of existing cars. tariffs. So that means a 27.5 % tariff on cars, 50 % on light trucks, given the tariffs that were already on place on both of those items. And then for Canada and Mexico, because President Trump has already put 25 % tariffs on those imports over those fentanyl concerns, tariffs on cars and parts from those countries starting next week could now be as high as 50%. Trump had exempted autos for one month. That exemption is currently in place. But as of now, we expect that to expire next week.

2:31So we could be as high as 50 % starting next week. Now, will any of that be negotiated down? It certainly could be. And that is one element of what auto companies are grappling with right now as they try to figure out how to respond. And I can tell you from talking with industry groups today, one challenge for them is simply where to focus. Do they look at pushing for exemptions? Do they focus on challenging the president on legal grounds? Or do they start looking at investing and trying to work around the tariffs? As for what comes next on the tariff front as you hinted at. April 2nd, the president said we can expect to see reciprocal tariffs on every trading partner on that day.

3:06And then beyond that, we know he has launched formal investigations into copper and lumber, paving the way for tariffs in those industries. He also continues to vow that there will be tariffs on semiconductors as well as on pharmaceuticals. So what's clear now, Brian, is that the April 2nd date we've been waiting for, that to me looks much more like the start to the tariff war and the start to the negotiations rather than the end to any tariff uncertainty. Brian? So are we at the beginning of the end or the end of the beginning? I'm not really sure. Megan Gosella, thank you very much. Tim Seymour, I don't know, but you probably know.

3:40And answer me this. Riddle me this. Tim Seymour. Okay. Why didn't the markets take more of a gigantic hit on this tariff news? Well, again, there are certain pieces of certain indices, especially industrial sides of this trade, that are actually pro-U.S. I mean, there's an element of this also. So if the view is this is just a negotiation and it's it's we we'd already certainly priced a fair amount of pain. I think some of the response in the auto sector was just that. But but there's there's a lot of dynamics here. If you look at growth type trades today and if you look at semiconductors, they were quite weak.

4:12In fact, we're only about a percent and a half above the lows before the market had a 10 percent rally. So I don't think that the markets were necessarily all that sanguine. I do think volatility is what concerns me more on some level. and some of the issues that we talked about are just dynamics in the market, which include liquidity doesn't seem to be as strong. People seem to be kind of sitting on the sidelines. There are certainly a case that some of the most crowded trades are ones that still could have some more room to go. So I just think the math is really complicated. We all know this.

4:40There's a lot of elements that are still unclear. We do know that trade representatives around the world are kind of getting together and figuring out what we can do. We start hearing, you know, the EU has their anti-coercion instrument, You know, and it sounds really scary, but really it's just another way of saying, hey, there's a lot that the EU can't do politically. There's a lot they can do as a trade bloc. That's really what they are. So if you think that we've only just begun, Karen Carpenter, by the way, great song. I know you're a big fan. I think this is a case where actually markets probably are not going to do a whole lot to the upside between at least now and April 2nd.

5:13I think, Steve, you get my broader point, which is to tariffs have been driving this market theory. about. That's what we're told. I'm not sure I totally believe that. But let's assume that is the case. We get this 25 percent announcement from the president. Yeah, the market was down today, but we didn't lose four percent on the S &P 500. The market was relative and evicts at 19. I think Megan, you know, classified as and you said is at the beginning of the end of the beginning. We don't know if they're ever going to even take place. So this could be he can't say it's a negotiating tactic because then it's not a negotiating tactic.

5:50So he's got to say that it's going to happen. Also, what are you negotiating? I don't know. Right. So I think no one has a problem with reciprocal taxes. Two and a half, we're charging for European cars. They're charging us 10. No one has a problem with going 10-10. So I think there's a level of reciprocity is factored in. But there's also with the market, the market sold off in a big way. We're coming in at a different entry point. So when you think about the correction the market's done, we're below the 200-day moving average. Again, that average is 57, 58 or thereabouts, plus or minus one. If you think that tariffs are going to take place, then you want to get into a cautionary stance you don't know.

6:35But then you don't know how long they're going to last. So if Mary Barra goes in and— The head of GM. The head of GM, sorry. The head of GM says to Donald Trump, president of the United States, we're going to build more plants. They're going to take two to five years or whatever the number is to build. But you have my word. We're going to build them. You're going to see that stock take off. I think he's going to say you have a carve out. So he's going to have a carve out for Ford. He's going to have a carve out for GM as long as you do the right thing. So by the right thing is I don't think this is the end of the auto production and manufacturing for the United States.

7:12EVs, when we have those mandates put in, Ford just this last quarter is losing$132 ,000 per EV vehicle that they're building. The whole year they're losing between$5 and$6 billion. And many, most are made in Mexico, by the way. And most are made in Mexico this year. So that wasn't the end when you had this 2030, they had to be plug-in hybrids, 2035, no more gasoline vehicles. That wasn't the end of the auto industry. And tariffs will be a blip. I think you could still be successful owning autos. So I think I agree with Steve and Tim. We don't we don't really know this. I wouldn't say that we have great clarity.

7:50We know we have an event coming up, but I don't think that that will be the event that we know. Fine. And this is said and done in April 2nd. We have clarity. I think the lack of clarity makes people uncomfortable. Right. The market hates uncertainty way more than it hates bad news. But we don't have yet for sure the bad news. So we also have some fear of inflation. We're sort of half afraid of these tariffs. What if they really do come to pass? That could be highly inflationary. And if that's the case, then that's bad for the market, right, bad for the economy. So we're trying to sort of figure out who are the winners and losers.

8:24Unclear if because things may change. But if there's inflation, I think that's bad for the market more broadly. And I guess, Bono, I mean, let's assume that the tariffs occur. The president said they would. So we have to take them. I get that they may not happen, but let's assume for purposes of this show that this actually occurs. Some of that will be passed through to the Iason family and the Grasso family and others. Some of that will be eaten by the car makers, which reduces earnings, which reduces estimates, reduces multiples. Is the market acting rationally? I think the market is acting as rationally as it can, given the uncertainty with the news.

9:05I'm in the camp that I think this is the beginning of the end. versus the end of the beginning. And by that, I think a lot of us were looking for more clarity going into April 2nd, where it sounds like April 2nd is a starting point of a much more protracted process. As you said, and I agree with Steve wholeheartedly, you can't say this is strictly a bargaining chip and I'm willing to kind of like move. But he did use the term lenient. These are going to be much more lenient than perhaps feared. And I'm not sure. It's like a lenient spanking, though. I don't know why. I don't understand what that means.

9:40Do you know what that means? To your point about, so you mentioned earnings, and she mentioned inflation and then going to the consumer, or the Eisen family. So I can definitely speak to that. The growing. Yes, it is. It's done growing. What I can tell you is, though, it feels like, are you familiar with the game Jenga? Of course, yeah. Okay, it feels like we're kind of playing Jenga here with the consumer, right? So is it going to be somewhat of a transitory type of inflation situation? Are we starting to see tick up slightly in the unemployment rate? Are we starting to see credit card balances?

10:11Are we starting to see tick ups and defaults? Okay, now you have upward pressure on auto. So you have auto and you have housing, which still remains somewhat sticky, although clearly off of the highs. And I think at some point you do have to call into question what the consumer ultimately looks like. Do they have the ability to bear additional costs? Well, they have been. Okay, I'm going to say something really unpopular right now. for everybody out there listening on the radio. Car costs are out of control before the tariffs. Okay? There are SUVs that are$150 ,000 that were$80 ,000 a few years ago.

10:46You got electric cars that are$75 ,000. They go 250 miles on a charge. That's bad enough, Tim. Now we want to layer this on. I guess maybe if I was going to say I was confused about something today, why did GM fall like 7 %? Should they benefit from more domestic manufacturing? No, because, in fact, they've got some major changes that they have to make. I mean, you know, in terms of their exposure to the cars, at least the pieces of the cars that they import and the elements of that that are not fully built here, there's an argument out there that 75 percent of their EBIT in 2024, which is about seven and a half billion dollars, is at risk here.

11:23And that's before you figure out their end of rounds and where they're going to work on some things. But the reality is GM was a company that traded cheap to anything, really to itself, but certainly to that free cash flow number for the last three or four years at a time it's never been run better as a company. I think to some extent, I think GM should be limited to the downside here because it wasn't expensive. GM, certainly since Thanksgiving, has started to price in noise around tariffs. And I think there's been a lot of concern there. The question really, though, is this the kind of support that Detroit needed?

11:56Is our economy, and if we want to think bigger and more macro around this, are we really looking to become a manufacturing economy here? And I think that's the question. That's the question for the markets. It gets back to a place where I think markets really, you know, there isn't a sense that we know where policy is going, and it gets back to all of what we've said. Well, let's bring in another voice to this auto conversation. Yossi Levy, better known as the auto dealership guy back when you were just an anonymous Twitter presence. Now you're out. You've got a beautiful studio. Yossi, I know you're talking to car dealers.

12:29You're talking to buyers. You're talking to sellers. We had a car dealer on Power Lunch today. He was kind of like, well, the consumer at some point will break. But so far, they've been able to pay these higher costs. What are you hearing? Brian, thanks for having me back on. You know, it's a very mixed bag at the moment. As you know, different automakers are exposed differently. And so there is a lot of anxiety from the dealers that are dealing with German manufacturers specifically. I would tell you that with the domestic dealers, Japanese, Korean, I've sensed not so much anxiety and almost like, hey, the auto market has been through crazy ups and downs over the last couple of years.

13:08This is just another blip on the radar. Auto manufacturers will adjust. They'll run extra shifts. They have all this added capacity in their US facilities. And so I would tell you, dealers are not too much in the fuss at the moment, although some of certain pockets are. You know, it's interesting. You brought up German company and there's Toyota trades here, Honda's, HMC, some of the German companies, Volkswagen. Obviously, they own pretty much everything else. You look at the X5, BMW X5. It's made in South Carolina, so that theoretically would not be tariffed. The three series, the five series, I think are made actually in Germany.

13:43BMW stands for Bavarian Motor Works. So if you're running a car company, do you even think you know what you're facing right now if you've got manufacturing in America, but other places as well? Here's the thing, Brian. These manufacturers don't want to lose market share. And so if you see what BMW did, they announced a week or two ago that they were going to price protect dealers up until May 1st, right, just as an example. And so at the moment, what it seems like is happening, Ferrari, which is not, of course, not a mainstream brand, right? Very much exotic luxury. They announced that they were raising prices by like 10 percent or so.

14:20Nobody cares. But the point I'm trying to make is that. People talk about Ferrari and Terras. I think there's actually, well, there's an important point here. I think the point here is that, and BMW is another good example, their price increases are about 4 percent. So those are two examples, two very different pockets of the market. But the point here, no one has said 25%, right? So why? And I think I said people are trying to see what their competition is going to do. They don't want to jump the gun. There's a lot of uncertainty. And so they're taking these baby steps. And BMW, in my opinion, is one of the best examples of this because they did send a memo to their dealers, which I got a hold of.

14:57And their price increases are only 4 % at the moment, effective May 1st. And so I think these manufacturers are going to have to wait and see what is going to happen. What are their what are the competitors going to do? And then they're going to react accordingly. So, Yoshi, if you had to place your bets where you just left off there, do they pull back on EV initiatives and put it into their manufacturing here? Or do they just pull back completely and just see where the chips fall? And the and the and the C choice of all this is that does any of this, in your opinion, really take place or are we a month out and we're having a completely different conversation?

15:36I think it's day by day at this point. There isn't a consensus among anyone or anything. The automakers and the dealers, it's very much a mixed bag at the moment because everyone's reacting to the live news. But I will tell you that I haven't seen. It's been relatively positive in the sense that dealers are aware that their manufacturers have added some added capacity. they can add to manufacture more cars and at least smooth this out. So if these do stick, that they can absorb it over some period of time. Everyone's going to take a different strategy. Not everyone's going to price protect dealers.

16:12Some are going to pass half of it to the consumer, some more. What's interesting is that if you look at the weeks of income required to buy a car today, it's about four less weeks or four fewer weeks than it was, say, a year and a half or two years ago. And so while we might not notice it, and it does feel like things are still very expensive, and cars are still roughly at$48 ,000 average price for a new car that's still right around all-time highs, the average weeks of income required to buy a car has actually come down. So I can't sit here and tell you consumers can't absorb more. They can't.

16:47That's just the reality based on weeks of income. But I just don't think that this is going to all get passed on to the consumer. I don't think that's feasible. And I think that BMW has kind of showed us here that it might be baby steps by the manufacturers. And by the way, and we'll let you go, Yossi, some of these margins are at record highs so that the companies have a little bit of ability to eat some of that. And to your point, we'll see what the consumer eats because right now they're buying a lot of$140 ,000 SUVs. I don't get it, but somebody does. Yossi, really appreciate that. Karen. Well, one of the things that is interesting to see, what's the effect on the used car market, right?

17:25If we're not going to have as many imports, you know, what does that mean for the used car? Theoretically, it's going to go up. It should go higher. Right. No, it should go higher. Look at the rental car company stocks today. Right. I don't get that one at all. So it's the sort of flips. There's uncertainty there. There's positive uncertainty at the moment. But if there's a resolution, then does that take the air out of the used car market? I don't know. So much uncertainty. It's hard to have a lot of conviction in any trade. Financing and servicing. I think that's where you would have. So that's it.

17:57And what you're going to talk about is like, can the consumer absorb it? Well, you used to have like a four-year car loan. Then you had a five-year loan. Now the average loan is like eight and a half years. We'll just do a 10-year car loan, Tim Seymour, and the financing companies will win. Yeah, although but but there's interest rate sensitivity. I mean, look what we see in the housing sector. It's not like people are going to go out and necessarily with higher rates and auto loans aren't 0.9 percent for five years anymore. They might be 0.9 percent for three months until it jacks up. So I just think that this is gets back to policy and the uncertainty around where it's all going.

18:32You know, the prospects for Detroit and auto demand weren't great before this. And so you've only made things worse. I think the question has got to be, what is the endgame here? Because I'm not sure we knew that there was an auto trade war going on three months ago. We certainly didn't know this going into elections. And I think this is why people are wondering where this goes. The retaliatory dynamics that Europe is able to put forth, I think, are going to at least be significant on the headline. That's right. And when you go to buy that new Fiat Punto, it's going to cost you. Remember that, Seymour.

19:06It's like Bobby Bonilla. You just pay forever. Yeah, well, on the first day of baseball, it is important to elicit Bobby Bonilla. I had to bring that up. All right, on deck, another big company wants in on the AI gold rush. The story of CoreWeave coming up and later on. Is Lulu A-OK, or will competition take the yoga pant maker to the mat? To the mat. You're welcome. We're back right after this.

19:42All right, welcome back. You are going to hear a lot about a company called CoreWeave over the next few days. It is an AI-related company. It's about all I can tell you about it. And some believe it could be a big tell on AI and demand generally. Christina Partsinevelis knows a lot about CoreWeave, which is why you're now joining us on set. Yes, it is. And so let's start with, think of CoreWeave almost like a tech chameleon. It's more from a crypto mining company to a 3D video rendering firm than a GPU cloud service company and now an AI hyperscaler renting out. This is to your point, Brian, renting out GPUs and saving clients from hardware hassle.

20:19Their dance, though, with NVIDIA is especially interesting. NVIDIA simultaneously is a 6 percent investor, which could get diluted, a GPU supplier and second biggest customer and also a potential cloud business competitor in the coming years. should they start to rent out their hardware. Microsoft drives two-thirds of CoreWeave's revenue. IBM Meta also have multi-year contracts that investors find pretty appealing. But here's the major problem, to your point, Brian. Debt, nearly$7.5 billion in debt repayments by the end of next year. Their perspective admits they need to borrow even more money to fulfill a$12 billion five-year open AI contract.

20:56Interest payments are especially high. Their GPU assets usually are supposed to have a three - to five-year shelf life. Their prospectus also says it's six years, according to CoreWeave, but it does face accelerated depreciation from NVIDIA's annual chip releases. Every year, NVIDIA puts out a new great one, which means that the old ones become cheaper and lower in value. And this means increasing monthly payments as their collateral loses value. So CoreWeave may be seen as a shapeshifter, but it's navigating some serious, like, complex financial terrain. Yeah, I think, Christina, brings up a lot of good points.

21:30You talked about customer concentration. You mentioned NVIDIA being two-thirds, and then you add in Microsoft, and I think that's like 75%. And then you talk about the cap structure, the debt load. I think this company went from$16 million in revenue in 2022 to$1.9 billion in 2024. Given the weighted average cost of capital, you're going to need to see this company continue to grow revenue and bottom line at this type of accelerated pace, which I just don't think is sustainable. If you look at interest payments versus versus net income, you have roughly 350, 350 million on either on either side of that.

22:04So you're going to continue to have to see this thing grow aggressively in order to keep pace. I will say that if there is a time to IPO, it was likely last year or right now. And I think this will be a barometer of how much steam is left in this trade in the short term. So they haven't priced it yet. No, right. We haven't heard yet. I thought it was actually going to be priced last night. And we were supposed to be getting it today. And my colleague, Leslie Picker, was reporting that it was anchored at about$40 from NVIDIA's side. But the pricing we still haven't heard yet. And according to the NASDAQ, it's still on for tomorrow.

22:38So they don't get a price tonight. Nobody prices on a Friday night, right? It's a long weekend. Precisely. Okay, so assuming they price tonight. That is the understanding and that it should open at usually latest by 1 p.m. Eastern tomorrow. And so we're looking at 40. I know Leslie said that, but is that where we are? Yeah, so Leslie is saying it's anchored, according to NVIDIA, of$40, but that's a range. And that would be the lower end of the range, which originally was$45 to$57. That is not the IPO price just yet, though. Karen, do we count this as some kind of AI proxy, like for the whole thing, or is CoreWeave CoreWeave?

23:14It's an AI mood proxy. It's an AI sentiment proxy. Vibe shift. Kind of, right? I mean, if the capital structure were different, then it wouldn't have, you know, there wouldn't be this urgency. I just think it's a CapEx sentiment. I mean, and again, all we're talking about these days is CapEx. What's been appropriate? Obviously, post-DeepSeek. That's what this is. It's not a question about whether the technology and the client base and the support of NVIDIA is extraordinary. The question is, was that yesterday's news at a time the debt load is very much in focus? Yeah, and I do have to correct something important that you said, Christina.