European equities opened the week in the red as fresh trade tensions resurfaced following U.S. President Donald Trump’s threat to impose a 30% tariff on imports from the European Union and Mexico, effective August 1. This announcement sparked a notable decline in the European automobile sector, which fell 1.5%, dragging broader markets lower.
🚗 Automakers Lead the Decline
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Porsche shares dropped 2.4%
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BMW and Mercedes-Benz each fell 2%
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The broader pan-European STOXX 600 index was down 0.5% at 544.74 points as of 0830 GMT
The auto sector, heavily reliant on exports to the U.S., bore the brunt of the sell-off as investors grew wary of escalating trade tensions. Only the UK’s FTSE 100 stood resilient, rising 0.2%, likely buoyed by its more domestically focused companies.
🗨️ Market Reaction: Wait-and-Watch Mode
Despite the negative reaction, experts believe markets are not fully pricing in the impact yet.
“The market is definitely taking the news negatively, but it’s not pricing it in… they are taking this with a pinch of salt and assuming that it’s just the start of a conversation,”
said Michael Field, Chief Equity Market Strategist EMEA, Morningstar.
🇪🇺 EU Response: Cautious but Ready
The European Union said on Sunday it will extend its suspension of countermeasures until early August and will continue to seek a negotiated settlement.
However, Italy’s Foreign Minister Antonio Tajani warned in an interview that the EU has prepared retaliatory tariffs worth over €21 billion ($24.5 billion) on U.S. goods if no agreement is reached.
🔎 What’s Next in European Automobile sector?
As trade negotiations remain unresolved, markets may continue to experience volatility in the coming weeks. Auto manufacturers and industrial exporters are likely to remain under pressure as investors await further developments before reassessing sector outlooks.
Image source: Reuters (European Commission President Ursula von der Leyen looks on during a joint news conference with Canadian Prime Minister Mark Carney and European Council President Antonio Costa, during an EU-Canada summit in Brussels, Belgium June 23, 2025. REUTERS)
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