Stockholm Stock Exchange experienced a significant drop in the early hours of Monday morning, with the OMX30 index plummeting over 2% by lunchtime. The reason for this downturn can be attributed to Donald Trump’s announcement of imposing tariffs on Mexico, Canada, and China.

Christer Gardell, the founder of activist fund Cevian Capital, expressed little surprise at the market’s reaction. He pointed out that the current dominance of index funds and speculative trading in the stock market leads to these drastic short-term fluctuations. Gardell believes that Trump’s tariff actions are likely part of a strategy to shake up the US’s trading relationships and may persist for up to a month.

One of the Swedish companies at risk due to these tariffs is Autoliv, a leading vehicle safety firm. DNB, a major bank, highlighted the potential impact of a 25% tariff on Autoliv’s production in Mexico, estimating an increase in costs by 125 million kronor annually. Autoliv’s stock dropped by 3.5% on Monday, reflecting investor concerns over the company’s exposure to these trade tensions.

Another company feeling the heat is SKF, which has significant operations in Monterrey, Mexico, producing bearings for North American car manufacturers. SKF’s stock price fell by over 4% as investors worried about the implications of potential tariffs on its operations. The company’s CEO, Rickard Gustafson, acknowledged the need to consider adjustments in response to the new administration’s trade policies.

Despite the challenges posed by Trump’s tariffs, Gardell remains optimistic about the resilience of companies like SKF and Autoliv. He views them as solid investments in turbulent times and trusts their management teams to navigate these uncertain waters effectively.

Assa Abloy, a major industrial player with factories in Mexico, is also facing a potential 5% hit to its operating profit due to the tariffs. However, there are companies poised to benefit from Trump’s trade actions. Carnegie highlighted forestry companies like SCA, Holmen, and Stora Enso as potential winners, as increased tariffs on Canadian timber could create opportunities for imports from Sweden and Finland.

Even SSAB, a steel giant with substantial US production, stands to gain from the situation. With Canada and Mexico being significant steel suppliers to the US, tariffs could drive up steel prices in the country, benefiting companies like SSAB. Gardell noted that the high valuation of US markets raises concerns about a possible bubble crash, emphasizing the importance of monitoring the flow of funds in and out of index products.

In conclusion, the impact of Trump’s tariffs on the global market is complex and far-reaching. Swedish companies are both vulnerable to the disruptions caused by these trade policies and positioned to capitalize on emerging opportunities. As investors navigate this uncertain landscape, strategic decision-making and a deep understanding of market dynamics will be crucial for success.

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