Shares in European automakers took a hit on Tuesday following Donald Trump’s announcement of potential tariffs on goods from China, Mexico, and Canada. Investors are growing anxious about how these proposed tariffs might affect the automotive industry and the broader European economy.
Volkswagen Group’s stock fell by 2.26% to €80.40, and Stellantis saw a 4.54% drop, bringing its shares to €12.24. The downturn reflects concerns about the impact of Trump’s plans to impose a 25% tariff on imports from Mexico and Canada, and a 10% tariff on Chinese products, once he takes office in January.
The United States, the world’s largest importer, relies heavily on China, Mexico, and Canada for goods, with these countries ranking among its top suppliers. If Trump follows through on these tariffs, it could raise prices on products such as food and automobiles in the US, which would impact manufacturers across Europe.
Shares in other European companies, including French car parts supplier Valeo and German automaker BMW, also fell as news of the tariff threats spread. The automotive sector, in particular, is vulnerable to such trade disruptions, with European manufacturers heavily dependent on exports.
Economic experts predict that the tariffs could seriously hamper European growth. According to the European Commission, the EU exported €502.3bn worth of goods to the US in 2023, with vehicles and machinery making up a large portion of those exports. Countries such as Germany and the Netherlands, which are highly reliant on trade, could see significant losses. Analysts estimate that Trump’s tariffs could reduce Europe’s GDP by as much as €260bn.
In response to a potential economic slowdown, the European Central Bank (ECB) may have to implement drastic measures, including cutting interest rates further to support growth. At the same time, the US Federal Reserve may continue to raise rates, causing a sharp divergence in monetary policy between the ECB and the Fed. This could result in a weaker euro, which may provide some benefits to exporters but also raise the cost of imports.
If the tariffs go ahead, Europe’s economic outlook could worsen, with countries like Germany, France, Italy, and Spain expected to experience a dip in GDP growth, potentially pushing the region closer to recession.