(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Jamie McGeever

ORLANDO, Florida, March 27 (Reuters) - While auto

company shares around the world are wilting following U.S.

President Donald Trump's decision to slap aggressive tariffs on

imported cars, the currencies of the most-affected countries are

holding up surprisingly well.

Trump said on Wednesday that a 25% tariff on imported

vehicles will take effect on April 3. There will be some delays

and exemptions, of course, but this could potentially add

another $55 billion to the cost of finished vehicles.

The United States imported $220 billion of finished cars and

vehicles last year, of which 22% came from Mexico, 18% from

Japan, 17% from Korea, 13% from Canada and 11% from Germany.

Imports of all auto products totaled $474 billion.

Given these figures, the reaction of equity markets on

Thursday was unsurprising: shares of South Korea's Hyundai fell

4.3%, roughly three times more than the broader KOSPI's loss,

and some $16 billion was wiped off Japan's transport index.

German auto shares fell too, extending their losses to 10%

over the last three weeks, a period in which the broader DAX has

flat lined. Analysts at Morgan Stanley expect shares in "all

exposed" European auto companies to fall a further 5-7% in the

near term.

But the FX market's reaction was mixed. The Mexican peso

fell 1%, and both the yen and Canadian dollar slipped around

0.3%. But the euro and South Korean won rose 0.3%.

Indeed, the currencies of the four largest auto-exporters to

the U.S. - Mexico, Japan, Canada and South Korea - are all

stronger against the U.S. dollar so far this year. And with the

exception of the Korean won, they are also all up since Trump's

inauguration on January 20.

The euro is obviously a special case because it is shared by

20 countries and has been propelled higher in recent weeks by

Germany's fiscal pivot. Regardless, the euro is also firmer

against the greenback this year.

On the face of it, this is a head-scratcher. The hit to

these economies will be significant if the proposed tariffs are

fully implemented and kept in place for some time.

But zoom out a little further, and a clearer picture

emerges: one of U.S. dollar weakness.

A DOLLAR STORY

While the 'Tariff Man's' protectionist trade agenda could

have positive benefits for the U.S. economy over the long term,

the short-term impact is clearly negative. The tariff talk is

damaging U.S. consumer and business confidence, and market

sentiment, much more than these threats are hurting other

economies.

And U.S. consumers have reason to be skittish.

Morgan Stanley estimates that, all else being equal, the 25%

tariff on auto imports equates to a price increase of more than

$90 billion across the industry, or nearly $6,000 per unit on

average. Arthur Wheaton, director at Cornell's School of

Industrial and Labor Relations, reckons vehicle prices could

shoot up by as much as $20,000.

For a country that uses and loves cars as much as America,

that would be extremely painful.

Trump's tariffs also appear to be one reason overseas

investors are reassessing their U.S. assets. Foreign investors

are reducing exposure to Uncle Sam for economic, political and

valuation reasons. And non-dollar currencies are benefiting in

turn.

"It's mostly a capital flight story. The tariffs are bad for

Canada, Mexico and other countries, but investors are also

fleeing U.S. assets," says Brent Donnelly, president of trading

and analytics firm Spectra Markets.

The auto exporters' currencies aren't immune to the

escalating trade war. The Canadian dollar slumped to a four and

a half year low last month, and the peso could well come under

more pressure due to the auto sector's relatively large

footprint in Mexico's economy.

But right now, the currency feeling the whiplash most from

Trump's tariffs may be the U.S. dollar.

(The opinions expressed here are those of the author, a

columnist for Reuters.)