Trump’s latest EU tariff threats have significantly contributed to escalating global trade tensions, as the US president also plans to levy tariffs on key trading partners such as Canada and Mexico.
US president Donald Trump revealed in a cabinet meeting on Wednesday that he is planning to impose 25% tariffs on goods imported into the US from the bloc.
Trump said: “We’ll be announcing it very soon. It’ll be 25% generally speaking and that will be on cars and all other things. … The European Union was formed to screw the United States – that’s the purpose of it and they’ve done a good job of it. But now I’m president.”
European stocks were lacklustre on Thursday morning, with the STOXX 600 index dropping 0.7% as the market opened. The German DAX 40 index also fell 0.6% on Thursday morning, with the French CAC 40 index declining 0.6% as well. Britain’s FTSE 100 was mostly flat.
Luxury car market shares stall
US stocks followed a similar trend, with the S&P 500 trading flat on Thursday morning, and the Dow Jones Industrial Average being down 0.4%.
Luxury car stocks were also dampened, with BMW dropping 1.9% and Porsche decreasing 2.3%. Audi’s share price was down 2.5% on Thursday morning too. Tesla’s share price saw a more marked plunge, starting the day 4% lower.
Ferrari was 4.9% down at market close on Wednesday too.
On the other hand, Mercedes-Benz’s share price inched up 1.6% on Thursday morning.
The weaker trend affected mid-range car companies as well, with Volkswagen being down 2.3% and Volvo Car AB losing 2.1% too. Stellantis was down 5.3% at market close on Wednesday while Ford saw a slight 0.4% decline on Thursday morning.
Global challenges remain
The global car industry is already facing a number of challenges such as supply chain shortages, partly caused by the lingering effects of the pandemic, as well as labour shortages. Rapidly changing regulations in important markets such as the EU and US have made matters worse and eroded profit margins.
Weaker worldwide demand, primarily caused by ongoing geopolitical and economic uncertainty, has further dampened sales, with consumers often hesitant to make big purchases with interest rates and inflation still high in several parts of the world.
The car industry is also especially vulnerable to escalations in trade tensions between the EU and China, after the former implemented higher tariffs on imports of electric vehicles from China into the bloc. This has led to increasing fears of German and US car companies facing retaliatory tariffs from China, which could potentially impact perks such as cheaper land and tax breaks.
EU plans counter measures, if tariffs imposed
Trump criticised the EU’s trade policies as well, slamming the bloc’s stringent rules around US car and food exports.
The European Union has said that it will be countering the action immediately and remains firmly against any tariffs which are deemed to be unjustified. It also highlighted that the creation of the bloc had made it easier for US companies to do business in the EU, while also protecting domestic European consumers and businesses.
Trump escalates global tariff tensions
Trump has also previously threatened 25% across-the-board tariffs against two key US trade partners, Canada and Mexico. Although these were initially supposed to go on 4 March 2025, on Wednesday, the US president hinted at them potentially starting from early April instead.
The US has also levied a 10% tariff against China, however, this could potentially be much higher in the coming months, with Trump’s campaign having included promises to impose tariffs of 60% against Chinese goods imported into the US. Reciprocal tariffs by the US on individual countries have also been threatened.
Concerns about US inflation
His consistent tariff threats since taking office have led to rising worries about quickening inflation and an economic slowdown among consumers and businesses alike. However, he has maintained that tariffs would ultimately boost domestic revenues, while creating new jobs in the US and decreasing the federal budget deficit.
Earlier this month, the US president also announced 25% tariffs on all imports of aluminium and steel into the country. This rolled back exemptions for a number of trading partners such as Mexico, Canada, the UK, EU, South Korea and Japan, among others.
It also raised the aluminium tariff rate from the previous 10% level that Trump had implemented back in 2018, while bringing back the 25% steel tariffs that had been imposed by the US earlier. An investigation looking at copper imports into the US has been launched as well, which has led to speculations that the metal may also face tariffs next.