Trump began waving the “big stick” of tariffs, and European auto stocks bear the brunt

The Zhitong Finance App noticed that European automakers' stock prices fell on Tuesday, and traders reacted to President-designate Trump's promise to impose high tariffs on Canada, Mexico and other countries. This news raised concerns about a potential global trade war.

The European automobile and parts basket was the worst performing sector in Europe, falling 1.7%, while the Stoxx 600 index fell 0.7%.

Trump said in a social media post that on his first day in office, he will be imposing 25% tariffs on all products from Mexico and Canada.

Paul Donovan, chief economist at UBS Global Wall, said, “Industries such as the automotive industry are highly integrated and vulnerable in the Mexico-US and Canada-US border supply chains.”

German Volkswagen shares fell 2.1%, while Stellantis shares fell 4.1%, the biggest drop.

Italian broker Intermonte said Stellantis would be “hardest hit” by the US imposition of tariffs on Mexican imports because the group imported 358,000 cars in 2023.

They said, “We estimate that every 1 percentage point increase in tariffs could affect pre-tax profits of 160 million euros, equivalent to 1.4% of the 2025 forecast.”

About a quarter of Strantis' sales in North America are produced in Mexico.

French auto parts manufacturer Valeo (Valeo) fell 2.5%, while German luxury brand BMW dropped 1.5%. Volvo cars fell more than 3%, and Daimler trucks fell 3.4%.

This is a quick reversal for the market. On Monday, markets welcomed fund manager Scott Bessent's nomination as Treasury Secretary, a key cabinet position with influence on economic policy and international affairs.

Some investors said that considering Bezent's financial career and knowledge of the market, his nomination was a relief, while others said his appointment might reduce the possibility of imposing tough tariffs.