European automakers saw their stocks drop on Tuesday in response to Donald Trump’s proposed tariffs on imports from China, Mexico, and Canada. The threat of these tariffs has raised concerns among investors about their potential impact on global trade and the European automotive sector.
Shares of Germany’s Volkswagen Group fell 2.26%, reaching €80.40, while Stellantis experienced a 4.54% drop, bringing its stock down to €12.24. Trump, who will take office in January, plans to impose a 25% tariff on goods from Mexico and Canada, as well as a 10% tariff on Chinese products. These measures, if implemented, could disrupt supply chains and increase the cost of goods in the US, including vehicles manufactured in Europe.
The news also led to declines in shares of other European auto-related companies, including French auto parts supplier Valeo, which saw a 2.54% drop, and BMW, which fell 1.36%. The European automotive industry is highly dependent on exports to the US, and these tariffs could significantly affect both production costs and profitability.
Economic analysts warn that Trump’s tariff plans could strain European growth, particularly in sectors reliant on international trade such as automobiles and chemicals. In 2023, the European Union exported over €500bn in goods to the US, with machinery and vehicles making up a large portion of that total. Countries with export-heavy economies like Germany and the Netherlands are expected to face the most severe impact.
The tariffs, if enacted, could also put pressure on the European Central Bank (ECB) to implement more aggressive monetary policies, including lowering interest rates to mitigate the economic downturn. Meanwhile, the US Federal Reserve may continue to raise rates, exacerbating the policy divergence between the ECB and the Fed. This could lead to a weaker euro, which might help European exporters but would raise the cost of imports.
As the threat of tariffs lingers, European countries like Germany, France, and Italy could see slower economic growth, potentially pushing the region closer to a recession.