European stocks fell sharply on Thursday after President Donald Trump’s plan to impose a 25% tariff on cars and other goods from the European Union, fueling fears of an escalating trade war.
Following the record from previous sessions, the Total European Stoxx 600 Index has retreated 0.7% as of 0813 GMT.
Stocks from major European automakers hit, with the automaker’s index exceeding 3%. Stellantis, Volkswagen, and Porsche all saw a decline of around 2%. Ferrari experienced a sharp decline of more than 6% following news that Exxon, the Agneli family holding company, sold a 4% stake in the luxury car manufacturer for 3 billion euros ($3.14 billion).
Meanwhile, Rolls-Royce saw a massive 16% profit profit, driven by the strong performance of UK engine manufacturers.
The company benefited from increased production of wide body jets and cost-cutting measures.
In revenue news, WPP, the UK advertising giant, fell 16% after reporting a 1% decline in annual organic revenues than expected. Howden Joinery cut its retail division by 1.7%, seeing a 6.6% decline as it missed its annual revenue expectations.
The uncertainty surrounding Trump’s tariff plans raises concerns about the impact on global trade. The proposed tariffs targeting European automakers were announced as part of a broader effort to reduce the trade deficit and challenge what the US government perceives as unfair trade practices.
The EU vows to respond to the new tariffs “fixed and instantly”, further exacerbating the horrors of the two economic giants’ total trade war.
This follows a pattern of tariff-related tensions under the Trump administration. This has previously imposed tariffs on steel, aluminum and various Chinese products, causing retaliatory measures and trade disputes worldwide.
Trump’s tariffs have been a consistent point of contention, with critics claiming that consumer prices could increase and disrupt international supply chains. However, supporters argue that it is necessary to protect US industry and reduce trade imbalances.
As the situation develops, market participants will closely monitor signals of agreement or further escalation.