StockBeat: Tariff Spotlight Shifts to European Automakers

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StockBeat: Tariff Spotlight Shifts to European Automakers
Credit: © Reuters.

By Geoffrey Smith -- The U.S. is now preparing to widen 25% tariffs on all imports from China. Will Europe be next?

Autos aren’t the only sector faring badly after early trade Monday in Europe, but they’re clearly in the firing line after the U.S. demonstrated its willingness to use tariffs so forcefully over the weekend. A decision on whether to impose tariffs on European autos is due on Saturday and the signs aren’t good, with the U.S. administration's action against China over the weekend showing no sign of accepting conventional wisdom that tariffs choke growth and leave consumers worse off.

“The reason autos are very important to our trade picture is about half of our trade deficit comes from the single product, automotive, and about the other half of our trade deficit comes from a geographic area and that’s called China,” U.S. Commerce Secretary Wilbur Ross told a press conference in Luxembourg on Friday.

All of Europe’s big carmakers are down over 1% this morning, with Daimler (DE: DAIGn ) down 2.8%, Volkswagen (DE: VOWG_p ) down 1.4%, Peugeot (PA: PEUP ) down 1.7%, Fiat Chrysler Automobiles (NYSE: FCAU ) down 1.2% and BMW (DE: BMWG ) down 1.1%. Renault (PA: RENA ) is faring slightly better, down only 0.5% as a result of separate news of it making a formal merger proposal to Nissan (T: 7201 ).

The escalation of the trade war is hitting markets generally, with the benchmark Euro Stoxx 600 down 0.7% at 374.86 points, while the U.K. FTSE 100 is down 0.1%, Germany’s Dax is down 0.9% and the French CAC 40 is down 0.7%.

The extent of the threat is best seen, however, in its impact throughout the supply chain. Parts maker Valeo (PA: VLOF ) is at the bottom of the CAC 40, down 3.5%, tiremakers Continental (DE: CONG ) and Michelin (PA: MICP ) are also down sharply, and even chipmakers Infineon (DE: IFXGn ) and STMicroelectronics (PA: STM ) are being affected by the general malaise, due to their exposure to the auto sector.

All that said, the sector may get a stay of execution. EU Trade Commissioner Cecilia Malmstrom said in an interview with the German newspaper Sueddeutsche Zeitung that “there are signs that (the deadline) could be extended because of the talks between the U.S. and China.”

“We’re prepared for the worst,” she added, noting that the EU has drawn up a list of U.S. products that would also have tariffs imposed on them if the U.S. goes ahead with its threat

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