Shares of major European automakers tumbled on Monday after U.S. President Donald Trump imposed steep tariffs—25% on imports from Mexico and Canada and 10% on Chinese goods—fueling concerns that EU exports could be next. The auto and beverage industries were among the hardest hit. Car parts supplier Stellantis, whose brands include Chrysler, Citroën, Fiat, and Peugeot, dropped 6.8%, while Volkswagen, Europe’s largest carmaker, fell 5.6%. Meanwhile, shares of Diageo, which exports tequila to the U.S. from Mexico, declined by 3%.
The Trump administration’s decision triggered a global market selloff, as investors worried that an escalating trade war could slow economic growth and hurt both consumers and businesses. Additionally, fears of rising interest rates further weighed on sentiment, raising concerns about higher borrowing costs for companies.
Trump’s action was the first major trade policy change since he took office last year, and it came after months of bluffing and threats. Analysts expect it to profoundly impact the global automotive industry, which relies heavily on North America for production and sales and complex global supply chains.
Across Europe, shares in Volkswagen, BMW, Porsche, and Volvo Cars fell between 5% and 6%. French car parts supplier Valeo, also highly exposed to US tariffs, slumped 8%.
European carmakers are particularly vulnerable to tariffs on imported steel and aluminum because they extensively use those metals in their manufacturing process. Analysts say the tariffs could cost them billions in extra costs, squeezing profits and potentially leading to plant closures.
US tariffs on the European Union are likely to be a major source of market volatility because the bloc is one of the world’s largest trade partners. The bloc’s economy is far larger than the United States, and a trade war could impose large costs on both sides.
A spokesperson for the EU said on Monday that the bloc will “respond firmly” if Trump imposes any new tariffs. The spokesperson added that across-the-board tariff measures raise business costs and harm workers and consumers on both sides of the Atlantic.
Shares in other big European firms also fell, with beverage producers such as Heineken HEIN.AS> and PepsiCo PEP.UL> also falling. The broader European stock market, the pan-European STOXX 600 index, was down 1.4%, with futures on Wall Street’s S&P 500 index down 1.3%. Traders were also cautious about earnings reports from Diageo and Vodafone Group (VOO.L). Both companies report results on Tuesday. Investors will be looking for signs that they can ride out the trade tensions and maintain profit growth this year. They will also watch for any comments from the US Federal Reserve on interest rates this week. Amid the uncertainty, oil prices dipped, with Brent crude oil down 0.8% and US crude down 0.4% to $51.18 per barrel.