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Trump Warned Europe with 20% Tariff on Cars: Danger Ahead?

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US–China trade war tension

After significant trade war tensions between the United States (SPY) and China (FXI)(YINN) in recent months, investors’ focus has now shifted toward the US–EU trade relationship. US President Donald Trump’s various announcements about the impositions of import tariffs on steel and aluminum on March 1 badly affected market movements.

Trump’s various announcements about import tariffs on China’s goods raised concerns about the US–China trade relationship. On Monday, June 18, he again announced that the United States would impose an additional tariff of 10% on $200 billion of Chinese goods. The broader-market S&P 500 Index (SPY), NASDAQ Composite Index (QQQ), and Dow Jones Industrial Average Index (DIA) fell 0.40%, 0.27%, and 1.1%, respectively, on June 19.

Trump’s focus on car imports from Europe

On Friday, June 22, President Trump tweeted that the United States will impose a 20% tariff on cars imported from the European Union (VGK). He threatened the European Union with reducing various duties on US cars. If the United States continues with this decision, we might see the trade relationship between the United States and the European Union deteriorate.

After President Trump’s tweet on Friday and escalating trade tensions with China on Monday, the broader-market S&P 500 Index witnessed a sharp fall. It fell 1.37% on Monday. Trump’s decision could reduce the US trade deficit, specifically with China. Plus, Trump wants to reduce what he views as unfair tariffs imposed by other countries on US products. However, investors believe this whole process could affect the aim of globalization.

In the next part of this series, we’ll analyze the performance of the S&P 500 index after Trump’s tweet on import tariffs for EU cars.

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