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Shares of major European carmakers and exporters took a hit on Tuesday, as uncertainty loomed over potential new U.S. tariffs following Donald Trump’s return to the presidency.
Auto Sector Feels the Heat
Trump hinted at the possibility of a 25% tariff on imports from Canada and Mexico starting February 1, citing concerns over illegal immigration and fentanyl trafficking into the U.S. While the tariffs have yet to be implemented, the speculation alone caused ripples in the market:
- Stellantis NV (EPA:STLAM): Shares fell by 1% in morning trading.
- Volkswagen (ETR:VOWG_p), BMW (ETR:BMWG), and Mercedes: Each saw their stock prices drop nearly 1%.
These automakers operate production facilities in Mexico, making them particularly vulnerable to such tariffs. A Volkswagen spokesperson warned that these potential measures could harm consumers and disrupt the global automotive industry.
Impact on Other Exporters
The tariff concerns also extended beyond the automotive sector:
- Spanish bank BBVA (BME:BBVA): With Mexico as its largest market, BBVA shares dropped by over 1% in Madrid. The Mexican peso weakened more than 1% against the dollar, adding further strain on the bank.
Trump’s Tariff Vision
During his inauguration, Trump emphasized tariffs as a key component of his economic strategy, stating that they would generate “massive amounts” of revenue to rebuild U.S. industries. He also introduced plans to create a new agency, the External Revenue Service, to collect these tariff revenues.
In addition to targeting Canada and Mexico, Trump suggested addressing the U.S.-EU trade deficit through either tariffs or increased U.S. energy exports to Europe. These remarks raised concerns about broader trade tensions between the U.S. and Europe.
Broader Market Reaction
The European auto sector index declined by 0.4%, reflecting the broader impact of tariff fears on the industry. With Trump hinting at the possibility of “universal tariffs,” exporters across various sectors are bracing for potential disruptions in transatlantic trade.
Looking Ahead
While Trump has yet to finalize or implement these tariff measures, his comments have already sparked uncertainty among investors and industry leaders. The potential economic implications of a trade war could weigh heavily on the European market, particularly in export-dependent sectors such as automobiles and banking.
As February approaches, all eyes will remain on Trump’s next moves, with market participants closely monitoring developments related to U.S. trade policy.
