Shares in Germany’s leading carmakers dropped sharply on Monday morning after former US President Donald Trump announced a new 30% tariff on all European Union imports, including cars, set to take effect from 1 August. The announcement has rattled markets and sparked calls for a unified EU response.
Automotive stocks lead losses
Volkswagen, BMW, Mercedes‑Benz and Porsche all saw immediate declines on the Frankfurt exchange, with share prices falling between 1.3% and 1.6%. The tariff threat comes as a major blow to Germany’s export-heavy automotive sector, which ships tens of billions of euros worth of vehicles to the United States annually.
Analysts say the new duty could force German manufacturers to either raise prices or absorb margin losses, with luxury brands particularly exposed. The announcement closes a window of regulatory ambiguity that had previously left some models exempt from earlier tariffs. Investors responded with sharp selling in early trading, reflecting fears of long-term structural damage to profit streams.
Broader market sentiment shaken
The impact of the tariff announcement was felt beyond the automotive sector. The STOXX 600 index declined 0.6%, led by losses in carmakers, parts suppliers and related industries. Germany’s DAX index also fell, with Siemens and Continental among the hardest hit. In France, the CAC 40 declined in tandem as concerns grew over spillover effects on Europe’s industrial base.
US-European trade tensions have flared repeatedly over the past decade, but the proposed blanket tariff on EU goods is one of the most sweeping threats to date. While investors are accustomed to inflammatory rhetoric from Trump, the formal timing and scope of the move appear to have caught markets off guard.
European officials vow retaliation
German Chancellor Friedrich Merz called for a coordinated EU approach, warning that Europe must not allow itself to be economically blackmailed. French President Emmanuel Macron echoed the sentiment, stating that the EU “must defend its economic sovereignty with determination.”
The European Commission has temporarily held off announcing countermeasures, but officials in Brussels signalled they are preparing a detailed response ahead of the 1 August deadline. Diplomats suggest the EU may target American agricultural goods, aviation components, or tech equipment if the tariffs are enacted.
Industry braces for disruption
Germany’s car industry is one of the pillars of its economy, employing more than 800,000 people and contributing heavily to the country’s trade surplus. The US is the second-largest market for German-made vehicles, accounting for nearly €25 billion in exports last year. Automakers have warned that sustained tariffs could force a rethink of investment strategies, potentially accelerating the shift of production to US-based plants to avoid duties.
In a statement, BMW said it was “monitoring the situation closely” and would explore “all regulatory and operational options” to limit disruption. Mercedes-Benz, which has a major assembly plant in Alabama, faces less immediate exposure, but still risks revenue pressure from models shipped directly from Europe.
Market outlook remains fragile
With less than three weeks before the new tariffs are scheduled to take effect, investors remain on edge. Talks between EU and US trade officials are expected to continue behind closed doors this week, but hopes for a breakthrough remain muted. For now, the spectre of higher trade barriers and retaliatory measures is likely to weigh on sentiment across global equities, particularly in Europe’s industrial heartland.
REFH – Newshub, 14 July 2025
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