US–Europe trade war concerns
US President Donald Trump’s announcement about the imposition of a 20% import tariff on all European cars increased uncertainty about US–Europe trade relations. On May 31, he announced that the United States will impose an import tariff on steel and aluminum from Mexico, Canada, and the European Union.
Impact on auto stocks
After an announcement about the imposition of an import tariff on all European cars, major European carmakers such as Volkswagen, Daimler, and BMW’s share prices witnessed a sharp fall on June 22–25. US automakers General Motors (GM) and Ford Motor’s (F) share price fell 1.5% and 1.3%, respectively, on June 25.
Import tariffs on European auto companies are likely to affect auto sales in the United States (SPY), as there would be considerable nervousness among investors about the increasing cost of cars. Auto sales are among the leading economic indicators. The improvement in auto sales is a positive sign for the economy. If US auto sales fall, they might affect overall economic sentiment.
Although Trump is mainly focusing on reducing the trade deficit and promoting the domestic market, the move could broadly affect the overall global economy and global trade relations.
In the next part of this series, we’ll analyze the performance of the technology sector.