Former President Trump announced that venture capitalist David Sacks will join his administration as the "artificial intelligence and crypto czar." In a statement on his social media account, Trump said, "In this important role, David will guide the administration's policies in two critical areas for the future of America's competitiveness: Artificial Intelligence and Cryptocurrency," and added that Sacks would "focus on making America the clear global leader in both fields." Trump also mentioned that Sacks would "protect freedom of speech on the internet and keep us away from Big Tech bias and censorship," and will lead the President's Council of Advisors on Science and Technology.

Fitch Ratings issued a warning in its December 2024 Global Economic Outlook (GEO) report, indicating that inflation risks in the United States have increased due to stronger-than-expected growth in consumer spending, impending increases in tariffs raising import prices, and a slowdown in net migration exerting pressure on labor supply growth.

Fitch expects global growth to decline slightly to 2.6% in 2025, a forecast that has not changed significantly since the September GEO. However, the relative stability at the global level masks some significant forecast changes in major economies. U.S. growth for 2025 has been raised by 0.5 percentage points to 2.1%, while the Eurozone growth forecast has been lowered by 0.3 percentage points to 1.2%. China's 2025 forecast has also been reduced by 0.2 percentage points to 4.3%.

"The main driver of our revision for the U.S. is the reassessment of the consumer spending outlook, where we have not observed the gradual slowdown we expected. Data revisions indicate that household income is rising much faster than previously measured, and savings buffers are stronger," stated Fitch, emphasizing that real household incomes in the Eurozone are also increasing, but the consumption recovery appears to be more subdued.

Chief Economist Brian Coulton noted, "There is significant uncertainty about what exactly will happen with U.S. tariffs, but substantial increases appear likely. The working assumption in our forecasts is that the average effective tariff rate in the U.S. will return to levels seen in the 1960s, primarily due to the assumption that the effective tariff rate on imports from China will rise markedly."

Coulton added, "We assume that the effective tariff rate in the U.S. will rise by more than 5 percentage points to 8%; this increase is largely explained by an assumption of a 25 percentage point jump in the effective tariff rate applied to China. Broad-based tariff increases are assumed, but the typical increase in the effective rate for other trading partners is around 2 percentage points. Our modeling indicates that tariff increases will have negative impacts on GDP, including the largest adverse shocks in Canada, China, Mexico, Korea, and Germany. The global impact is likely to be felt more acutely in 2026, prompting us to lower our GDP growth forecast for China in 2026 by 0.3 percentage points to 4.0% and our global growth forecast by 0.1 percentage points to 2.3%."

BofA Securities notes that European car manufacturers will face price pressures, regulatory hurdles, and competition from Tesla (NASDAQ:TSLA) and Chinese rivals in 2025. The firm stated in a note that while established car manufacturers are confronted with profit margin risks, selected automotive suppliers and several OEMs present attractive opportunities.

The broker listed its views along with "buy" ratings for the following stocks:

Continental: The firm recommends Continental, citing potential value unlocking from the planned automotive spin-off, cost savings from restructuring, and semiconductor tailwinds expected to enhance growth in 2025-26.

Valeo (EPA:VLOF): Lower capital expenditures, cost savings, and more profitable contracts position Valeo for significant EBITDA and earnings per share growth. BofA also sees room for earnings or guidance surprises given the low market expectations.

Pirelli: With strong visibility for high single-digit earnings growth, Pirelli is well positioned in the challenging automotive sector. The resolution of Chinese shareholder uncertainty could further boost the stock.

Stellantis (NYSE:STLA): Following a transitional 2024, Stellantis is expected to rebound strongly in 2025 with improved fixed cost absorption and minimal impact from stricter CO2 regulations. Investor confidence may increase with the appointment of a new CEO by Chairman John Elkann.

BofA downgraded Mercedes-Benz (OTC:MBGAF) to "Underperform," citing a challenging 2025 marked by a weak model cycle and the transition to the MB.EA platform. The firm expects challenges to persist through 2026.

Car manufacturers are facing difficulties stemming from stricter EU emissions targets, which could impact profit margins unless delayed regulations provide relief.

However, suppliers appear better positioned to benefit from restructuring and lower input costs despite short-term risks, such as a potential Volkswagen (ETR:VOWG_p) strike early in 2025.