Sharp declines among major German automakers Volkswagen (VWAGY), BMW (DE:BMW) and Mercedes-Benz (MBGAF) dragged European stock markets into the red on Thursday, as investors sought shelter from the fallout of Donald Trump’s 25% tariff on auto imports. The move lower for automakers saw the German blue-chip DAX index fall 1.3% early on Thursday before it trimmed losses somewhat.
Shares of various European automakers fell after Japanese car firms posted declines in overnight trade in Asia. Jeep-owner Stellantis (STLA)) was down almost 4% in Milan (IT:STLAM) after Toyota (TM) and Honda (HMC) fell over 2% overnight.
Among the big German automakers 80% of Volkswagen’s car sales in the U.S. are imports, while the figure is about 60% for Mercedes-Benz and 50% for BMW. BMW sold 371,346 vehicles in the U.S. during 2024, while VW delivered 379,178 units and Mercedes hit 324,500 passenger car sales in 2024, a 9% increase compared to the same period in 2023.
U.S. automakers also got snared in the net. General Motors (GM), which makes a lot of its vehicles in Mexico, fell about 7% in the pre-market and Ford fell 4%. Along with Chrysler-owner Stellantis, Bernstein estimates a 60% average decline in free cash flow for the Big Three Detroit carmakers.
The declines came after President Donald Trump said he will impose a 25% tariff on “all cars that are not made in the United States”, with the levies due to take effect on April 2nd.
Calls for Firm Response
France’s finance minister Eric Lombard described the 25% tariffs as “very bad news” and that the only solution was for the European Union to raise tariffs in response. Likewise, German economy minister Robert Habeck called for a “firm response to these tariffs from the EU.” Japan’s prime minister Shigeru Ishiba told parliament that “all options will be on the table” in response to car tariffs.
Trump sought to push back against any potential countermeasures with threats. “If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had!,” he said in a Truth Social post.
Meanwhile, Trump said he would be willing to reduce tariffs on China to get a deal done with TikTok’s parent ByteDance.
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