European automakers faced a sharp decline in stock prices on Tuesday as Donald Trump’s proposed tariffs on China, Mexico, and Canada raised concerns about the impact on trade and the broader economy. Shares of major European car manufacturers like Volkswagen and Stellantis fell sharply, as investors reacted to the possibility of significant disruptions to global supply chains.
Volkswagen’s stock dropped 2.26%, falling to €80.40, while Stellantis saw a more significant decline of 4.54%, bringing its share price down to €12.24. Trump’s plan to impose a 25% tariff on imports from Mexico and Canada, as well as a 10% tariff on Chinese goods, is seen as potentially raising the cost of products, including vehicles, in the United States.
In addition to the major auto companies, French car parts supplier Valeo saw its stock fall by 2.54%, while BMW experienced a 1.36% drop. Given the high dependence of European manufacturers on exports to the US, these tariffs threaten to disrupt their operations and raise production costs.
Economists warn that if these tariffs are enacted, they could have a significant impact on Europe’s economic growth, particularly in sectors like automobiles and chemicals, which are heavily reliant on trade. The European Union exported goods worth €502.3bn to the US in 2023, with machinery and vehicles accounting for a large portion of those exports. The economies of countries such as Germany and the Netherlands, which are highly trade-dependent, are expected to feel the greatest strain.
The potential for these tariffs to harm Europe’s economy could also force the European Central Bank (ECB) to respond with more aggressive monetary policies, including cutting interest rates to counteract the slowdown. Meanwhile, the US Federal Reserve may continue to raise rates, creating a widening divergence in monetary policy between the ECB and the Fed. This could weaken the euro, potentially benefiting exporters but also driving up the cost of imports.
As the situation unfolds, many analysts fear that the tariffs could push Europe closer to a recession, with countries like Germany, France, and Italy likely to see slower growth in the coming years.
