European auto stocks drop 2% as Trump's 50% steel tariffs heighten EU trade tensions

European auto stocks drop 2% as Trump's 50% steel tariffs heighten EU trade tensions

European auto stocks experienced a significant drop of 2% on Monday, June 2, 2025, following U.S. President Donald Trump's announcement of a 50% increase in steel and aluminum tariffs, effective June 4. This move has exacerbated trade tensions between the United States and the European Union, with European auto manufacturers facing potential disruptions in their supply chains and increased costs.

The doubling of tariffs has drawn swift and strong reactions from key trading partners. The European Commission, which enforces laws created by the 27-nation European Union (EU), expressed its "strong regret" over Trump's decision, warning that it will respond with countermeasures. The Commission noted that the tariff increase adds "further uncertainty to the global economy" and increases "costs for consumers and businesses on both sides of the Atlantic" [2].

The German steel association WV Stahl also highlighted the significant pressure the increased tariffs will put on the European steel industry. Maria Rippel, CEO of WV Stahl, stated that the move will burden European direct exports to the US market and reorient traditional supplier countries to the EU market, further increasing import pressure [3].

Steel rebar futures in China were near eight-month lows at the end of May, reflecting ongoing concerns about demand. The Chinese government's announcement of a ban on the sale of homes before completion could also exacerbate financial stress in China's property sector, a major consumer of steel, potentially dampening demand further [1].

The European auto sector, already facing challenges from Brexit and the global semiconductor shortage, is now grappling with additional costs and potential supply chain disruptions. Analysts predict that the increased tariffs could lead to higher production costs and, consequently, higher prices for consumers.

The EU has not yet implemented countermeasures, but it has warned that if no "mutually acceptable solution" is reached by July 14, both existing and additional EU measures will automatically take effect [2]. The EU proposed countermeasures on up to $107.2 billion of U.S. imports if negotiations with Trump fell through.

Investors and financial professionals are closely monitoring the situation, as the trade tensions could have broader implications for global markets. The European auto industry, one of the largest in the world, is expected to be significantly impacted by the increased tariffs.

References:
[1] https://www.tradingview.com/news/te_news:460794:0-trump-threatens-to-double-steel-tariffs/
[2] https://www.inkl.com/news/eu-commission-strongly-regrets-trump-s-doubling-of-steel-tariffs
[3] https://gmk.center/en/news/doubling-of-us-tariffs-on-steel-imports-will-put-pressure-on-european-steel-industry-wv-stahl/