Investing.com -- Shares of major European carmakers dropped sharply on Tuesday, fueled by uncertainty over potential new US tariffs following Donald Trump’s inauguration as president.
Although Trump did not immediately implement the tariffs he had previously pledged, he indicated he is considering a 25% duty on imports from Canada and Mexico starting February 1 over issues related to illegal immigration and fentanyl entering the US.
European automakers, including Stellantis (NYSE:STLA) NV (EPA:STLAM) and Volkswagen (ETR:VOWG_p), operate production facilities in Mexico that supply vehicles to the US market.
Stellantis shares declined about 1% by 10:02 GMT, while the broader European auto sector fell roughly 0.4%. Germany’s Volkswagen, BMW (ETR:BMWG), and Mercedes saw shares drop nearly 1% each.
Tariff concerns also impacted Spanish bank BBVA (BME:BBVA), which counts Mexico as its largest market. The bank’s stock declined more than 1% in Madrid as the Mexican peso weakened by more than 1% against the dollar.
Adding to exporters' worries, Trump mentioned the possibility of universal tariffs but stated that the US is not yet prepared to take that step.
A Volkswagen representative expressed concern over the potential negative economic effects US tariffs could have on consumers and the automotive sector.
Trump also said he wants to address the US trade deficit with the European Union, suggesting tariffs or increased energy exports as potential solutions.
Throughout inauguration day, tariffs remained a central theme, with Trump asserting that such measures would generate "massive amounts" of federal income to support the rebuilding of American industry. He stated that these revenues would be collected by a newly created agency called the External Revenue Service.
"Tariffs are going to make us rich as hell," Trump told supporters at Capital One (NYSE:COF) Arena in Washington. "It's going to bring our country's businesses back that left us."