European Markets Drop as Trump Tariffs Impact Autos, Thales Shares Surge
European markets took a sharp downturn on Tuesday amid growing concerns over the global effects of U.S. tariffs on Mexico, Canada, and China. By 10:40 a.m. in London, the Stoxx 600 index had fallen 1.23%, with automotive stocks particularly hard-hit, dropping by 4.3%. Major automotive companies, such as Stellantis and Mercedes-Benz, saw significant declines of 5% and 3.5%, respectively. The renewed trade tensions have raised fears of inflation in the U.S. and the potential escalation of the global trade war.
One of the few bright spots in the market was Thales, a French defense firm, whose shares surged as much as 12% after reporting impressive full-year results. The company saw a 9% rise in order intake and a 5.7% increase in adjusted operating profit for 2024. This performance came amid an uptick in defense spending across Europe, with analysts highlighting the geopolitical backdrop, including U.S. moves on tariffs and ongoing regional security concerns.
The U.S. tariffs, set at 25% on Canadian and Mexican goods, as well as an additional 10% on Chinese imports, were officially enacted following President Trump’s announcement. In retaliation, China imposed its own tariffs on U.S. goods. These developments have weighed on global markets, especially those in Europe, where supply chains in the automotive sector are particularly vulnerable to tariff disruptions. Analysts predict that the automotive industry, including suppliers like Continental, will face additional volatility due to these trade measures.
Further challenges came from Continental, a major German auto supplier, whose shares fell 8% after the company reported mixed results. Despite achieving higher profits due to efficiency measures, Continental’s full-year sales dropped, and CEO Nikolai Setzer expressed concern over the potential negative impact of tariffs. With ongoing trade uncertainty, businesses like Continental are grappling with the complexities of cross-border supply chains and the challenge of absorbing tariff costs, leading to a cautious outlook for the coming year.
SOURCE: CNBC