Shares of German automakers nosedived on Wednesday as concerns grew over potential tariff hikes by a returning Trump administration.
Porsche stock was down by 5.3% at 12:04 pm GMT, slightly up after hitting its lowest level since going public over two years ago.
Volkswagen was down by 5.4% following its drop to its 52-week low.
Mercedez Benz was down by 6.31% while BMW was down by more than 7%, in part also due to disappointing quarterly earnings.
Investors fear the newly elected US president Donald Trump may follow through on pledges to impose tariffs on foreign-made vehicles entering the US.
During the campaign Trump claimed the EU was not a good trading partner for the US, saying, “They don’t take our cars, they don’t take our farm products, don’t take anything. You have a $312 billion deficit with the EU. You know, the EU is a mini – but not so mini – is a mini China.”
Trump’s trade policies, driven by a protectionist stance, aim to bolster American jobs by discouraging imports and supporting domestic industries.
Trump’s protectionist stance and impact on German economy
During his campaign, Trump reiterated his intentions to apply a 20% tariff on European vehicles, a move that could cut Germany’s GDP by up to 1.5%, according to estimates by the German Economic Institute IW.
Already grappling with a sluggish economy projected to shrink for a second consecutive year in 2024, Germany could face substantial financial strain should tariffs take effect.
For Germany, the US has become a pivotal market for higher-margin combustion-engine vehicles like SUVs, which are still popular compared to the fast-growing EV demand in Europe.
German automakers also operate plants across the US, where they produce cars not only for American consumers but for global markets.
A trade war could severely disrupt these operations, creating ripple effects that would complicate production and logistics.
Trump’s anticipated policies could also target climate agreements and multilateral trade, creating additional friction with European nations.
According to Clemens Fuest, president of the Ifo Economic Research Institute, Trump’s agenda includes “greater restrictions on international trade,” marking a likely end to the collaborative trade policies that previously strengthened US-German ties.
German carmakers voice concerns against EU tariffs against China
Trump’s victory and fears of him implementing contentious tariffs against European vehicles come at a time when Germany’s carmakers are already dealing with the fear of China retaliating against tariffs imposed by the EU on its electric vehicles.
The European Union has raised tariffs on electric vehicles from China to as high as 45%, intensifying trade tensions between two of the world’s top export powers.
Prominent European carmakers like Mercedes-Benz Group AG and BMW AG have lobbied against the tariffs, fearing the trade dispute could impact their sales in China during an already challenging period.
Earlier this week, Volkswagen AG’s chief labor representative announced plans for Europe’s largest automaker to close at least three factories in Germany.
European leaders brace for economic fallout
German Chancellor Olaf Scholz congratulated Trump on his victory.
“For a long time, Germany and the US have been working together successfully promoting prosperity and freedom on both sides of the Atlantic. We will continue to do so for the well-being of our citizens,” Scholz said.
However, later, Scholz and French President Emanuel Macron also held a telephone call to discuss what a second Trump term could look like for Europe.
British Foreign Affairs Committee Chair Emily Thornberry expressed concerns over Trump’s potential tariffs, warning of the “chilling effect” they could have on both UK and EU economies.
With the US as one of the UK’s largest trading partners, she highlighted the potential impact of tariffs ranging from 20% on European imports to as much as 200% on goods from China
As Trump ramps up anti-EU trade rhetoric, the ripple effects across Europe’s automakers and wider economy signal potential setbacks for trade relations that, until now, had bolstered economic stability on both sides of the Atlantic.
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