Driving Ahead: How a EU/US Trade Deal Could Rev Up Automakers' Stocks

The clock is ticking for European and U.S. automakers as the July 9 deadline looms for a potential trade agreement that could slash crippling tariffs and reignite cross-Atlantic automotive growth. With automakers like BMW, Mercedes-Benz, and Tesla facing tariffs as high as 25% on vehicles exported to the U.S., the stakes are existential. A deal to reduce or eliminate these barriers could unlock a 15-20% valuation rebound in automaker stocks by late 2025, according to market analysts. Here's why investors should pay close attention—and where to place their bets.

The Tariff Time Bomb: Why Automakers Are Racing Against the Clock

Current U.S. tariffs on EU automotive exports—25% on cars and 50% on steel/aluminum—are already costing German automakers like Daimler and BMW hundreds of millions annually. The EU's retaliatory tariffs, paused until mid-July, could expand to $95 billion in U.S. goods if talks fail. But automakers are the linchpin: a 50% tariff hike by July 9 would cripple premium brands and mass-market producers alike.

The silver lining? A breakthrough on EV exemptions or a “zero-for-zero” tariff pact could create a win-win. The EU's automotive sector, which accounts for 7% of its GDP, is pushing for exemptions for electric vehicles—a segment where U.S. companies like Tesla and Ford are racing to compete. For investors, this means prioritizing automakers with strong EV pipelines and transatlantic production footprints.

The Supply Chain Sweet Spot: Where Cost Cuts Meet Growth

A successful deal would do more than just remove tariffs—it would streamline supply chains. U.S. automakers like Ford, which relies on EU-sourced components, and EU firms like Stellantis (owner of Peugeot and Jeep) could slash production costs by eliminating tariffs on steel, batteries, and semiconductors.

Consider this:
- Steel sector: EU companies like ArcelorMittal and ThyssenKrupp export £370 million in steel to the U.S. annually. A 10% tariff cap (versus the current 50%) could boost their margins by 8-12% in 2025.
- EV supply chains: Removing tariffs on rare earth minerals and battery components would reduce bottlenecks for firms like Tesla and Volkswagen's North American operations.

The Investment Playbook: Who Wins if the Deal Goes Through?

1. Premium EV Makers:
2. Tesla (TSLA): Already dominant in the EV market, Tesla could leverage a tariff-free environment to undercut EU rivals in Europe while expanding its U.S. Supercharger network.

3. BMW (BMW.DE): Its i-Series EVs, which rely on cross-border supply chains, would gain pricing power if tariffs are eliminated.

4. Mass-Market Automakers:

5. Stellantis (STLA): With factories in both regions, Stellantis could optimize production to meet U.S. demand without incurring tariffs on parts sourced from Europe.

6. Steel and Materials:

7. ArcelorMittal (MT): A tariff rollback would reverse its 2025 profit warnings tied to U.S. market losses.
8. Albemarle (ALB): A U.S. rare earths producer that could fill gaps left by China's dominance if supply chains diversify.

Risks on the Road: What Could Go Wrong?

• Political Gridlock: U.S. President Trump's threat to raise tariffs to 50% unless the EU caves could derail talks.
• Sectoral carve-outs: The U.S. may exclude key automotive components (e.g., semiconductors) from tariff relief.
• Used car market disruption: A post-deal surge in new car sales could depress used car valuations, hurting dealers like CarMax (KMX).

The Bottom Line: Hit the Gas—or Tap the Brakes?

Investors should overweight automakers with transatlantic exposure and strong EV portfolios. A deal by July 9 would likely trigger a sector-wide rally, with BMW and Tesla leading gains. For steel stocks, wait until post-July clarity—but position now in ArcelorMittal for a rebound.

The EU-U.S. automotive industry is at a crossroads. A successful trade deal isn't just about avoiding tariffs—it's about unlocking a $1.6 trillion market's full potential. For investors, the wheels are in motion.