Auto stocks suffer as Trump walks the talk on tariff threat

Automotive companies in the US and Europe are starting to feel the heat of President Trump’s latest tariff attack, levying up to 20% tax on vehicles imported from the European Union. Though the move was widely expected, the high tariff rate has triggered serious concerns about the diplomatic and business ties between the US and Europe.

Friday’s announcement follows an investigation carried out by a government department into the details of automobiles imported to the US. A similar procedure was followed while imposing a sanction on the import of steel and aluminum a few months ago, forcing the targeted countries including China and UK to pay back in the same coin.

The announcement follows an investigation by a government department into the details of automobiles imported to the US

While the latest decision has put the US operations of leading European carmakers at the receiving end, companies like Daimler might be forced to shelve their capacity expansion plans in America for the time being.

As usual, Trump took to Twitter to make the announcement, blaming the non-friendly trade policies practiced by the European governments for the aggressive move. Considering the huge volume of passenger cars imported to the US from Europe, the economic impact of the latest tariffs will be much bigger than that of the steel and aluminum levies.

In fact, it’s been Trump’s long-term intention to rein in the influx of European cars into the US, and he had explicitly expressed his concerns about it quite often. Meanwhile, taking forward his strategy to reduce America’s trade deficit with international partners, the President has asked his financial advisors to identify more Chinese items to be brought under the new tariff regime, paving the way for a full-blown trade conflict that could have far-reaching implications on various auxiliary industries also, such as logistics, air transport and forex.

Shares of BMW and Daimler, the maker of Mercedes Benz, tanked in the European stock markets following the announcement today, while Volkswagen and Fiat managed to recoup their initial losses later. In the US bourses, Ford (F) and General Motors (GM) suffered losses, but the latter recovered slightly as trading progressed.