Richard Parks European automakers experienced a significant drop in stock prices on Tuesday as investors reacted to Donald Trump’s threats to impose heavy tariffs on China, Mexico, and Canada. The news sent shares of major companies such as Volkswagen and Stellantis tumbling, reflecting concerns over the potential impact of these tariffs on business operations and European economic stability.
Volkswagen’s stock fell 2.26%, dropping to €80.40, while Stellantis saw a steeper decline of 4.54%, with shares falling to €12.24. Trump, set to take office in January, announced plans to implement a 25% tariff on imports from Mexico and Canada, along with a 10% tariff on Chinese goods. These tariffs, if enacted, could disrupt global supply chains and raise the cost of goods in the US, including vehicles produced by European automakers.
In addition to Volkswagen and Stellantis, French auto parts maker Valeo saw a 2.54% decrease, while BMW’s stock fell by 1.36%. European car manufacturers, heavily reliant on exports to the US, are particularly vulnerable to the trade disruptions these tariffs could cause.
Economic experts warn that Trump’s tariff plans could hurt European growth, particularly in trade-dependent sectors like autos and chemicals. The European Commission reported that in 2023, the EU exported over €500bn in goods to the US, with machinery and vehicles making up a significant portion of that trade. Countries such as Germany and the Netherlands are expected to face the worst economic impact, with potential losses in the hundreds of billions of euros.
If these tariffs are imposed, the European Central Bank (ECB) may be forced to implement more aggressive monetary policies, including cutting interest rates to stimulate economic activity. Meanwhile, the US Federal Reserve could continue raising rates, leading to a divergence in monetary policies between the ECB and the Fed. This scenario could weaken the euro, providing some relief to European exporters but also raising import costs.
As the trade dispute unfolds, there are growing concerns that the tariffs could push Europe closer to recession, with GDP growth in countries like Germany, France, and Italy expected to slow.