FX.co ★ European markets worried over auto tariffs

The United States intends to slap 25% tariffs on Chinese goods, so the European markets fear that similar measures may affect them. Many experts predict that the lingering stand-off between the United States and China may derail the European automobile industry as extra custom duties may be imposed on European cars.

Recently, the stocks of the EU car producers have declined notably. Analysts say that the automotive industry can suffer a hard blow of the aftermath of the trade war. The US government is to decide whether to impose tariffs on EU-made cars or not. The current state of affairs does not encourage market participants.

Daimler shares slid by 2.8%, Volkswagen shares depreciated by 1.4%, while Peugeot stocks declined by 1.7%. At the same time, shares in Fiat Chrysler Automobiles lost 1.2% and BMW stocks decreased by 1.1%. Renault was the best performer among the European carmakers with its shares inching down by 0.5%. The shares were buoyed by the announced merger with Nissan.

The automotive industry plays a vital role in foreign trade, US Secretary of Commerce Wilbur Ross said. He outlined that half of the US trade deficit comes from the car products and another half comes from China. Escalation of the US-China trade conflict affected the global stock market. Thus, the Euro Stoxx 600 tumbled by 0.7% to 374.86 points, the British FTSE 100 lost 0.1%, the German Dax declined by 0.9%, and the French CAC 40 dropped by 0.7%.

The risk of a crash in the automotive stocks had a negative impact on other industries as well. In particular, a 3.5% plunge in shares in the Valeo car parts group contributed to a decline in the CAC 40. Besides, shares in Continental and Michelin tire makers also decreased. Moreover, chip producers Infineon and STMicroelectronics suffered a plunge since they are also connected with the automotive industry.

However, the imposition of tariffs may be put off after all. European Commissioner for Trade Cecilia Malmstrom said that the decision on introducing tariffs might be postponed due to continuous negotiations between the United States and China.