European stock markets closed lower on Tuesday, extending losses as trade tensions between the U.S. and Canada intensified. The pan-European Stoxx 600 index ended the day down 1.7%, as concerns about global growth, spurred by escalating trade disputes, continued to weigh on investor sentiment.
Stellantis Shares Drop After Trump’s Tariff Threats
One of the biggest losers was Stellantis, the owner of Jeep and Dodge, which saw its shares fall by 5%. The decline was linked to U.S. President Donald Trump’s threat to raise tariffs on cars coming into the U.S. from Canada. Stellantis, which has several production facilities in Canada, was notably impacted. The Stoxx Autos index dropped 2.13% in response to the trade tension.
Currently, Stellantis and other automakers with major production operations in the countries targeted by tariffs, including Volkswagen, are benefiting from a temporary tariff reprieve under the United States-Mexico-Canada Agreement (USMCA). However, Trump’s recent statement on social media threatened to undo this reprieve. He warned that, unless Canada drops other long-standing tariffs, he would substantially increase U.S. tariffs on Canadian cars, potentially putting an end to Canada’s automobile manufacturing business. Trump also suggested that the manufacturing of these vehicles could shift to the U.S.
Higher Tariffs on Canadian Steel and Aluminum
In addition to the car tariff threat, President Trump also announced plans to impose a 25% tariff on Canadian steel and aluminum imports, which will bring the total duties to 50% starting Wednesday. This was further compounded by Ontario’s decision to impose a 25% tax on electricity exports to the U.S., further escalating the trade dispute.
Other European Stocks and Sectors Decline
In other European sectors, the Stoxx Europe 600 Travel & Leisure index fell 3%, with International Airlines Group (owner of British Airways) dropping 6.1%. The airline had announced the launch of a new corporate investment arm that would channel up to €200 million ($218 million) into companies shaping the future of aviation.
Healthcare stocks also struggled, particularly after Novo Nordisk, the Danish pharmaceutical giant, reported disappointing results from its weight loss drug trial, leading to a 3.8% drop in its shares.
Meanwhile, Volkswagen reported a 15% drop in its annual operating profit, citing rising costs and “extraordinary expenses” tied to its ongoing restructuring plans.
Global Growth Concerns and Economic Outlook
The decline in European markets follows a broader trend of global volatility, with worldwide markets continuing to show signs of uncertainty, especially regarding the impact of trade tensions and tariff policies. Despite growing concerns, economists argue that a full-blown recession is not imminent, although the U.S. economy is going through what Trump referred to as a “period of transition.”
Euro Strengthens Against U.S. Dollar
While European stock markets struggled, the euro gained strength against the U.S. dollar, rising 0.88% to $1.0927. The U.S. dollar index, which measures the greenback against a basket of currencies, dropped by 0.61%, signaling a weaker dollar as trade tensions and global growth fears dominated market sentiment.
Conclusion
The escalating trade conflict between the U.S. and Canada, particularly over tariffs on steel, aluminum, and automobiles, continues to weigh on European markets. With concerns over global growth and the unpredictable nature of trade policies under President Trump, investor sentiment remains cautious. The Stellantis stock drop and the broader decline in European indices reflect growing uncertainty in the face of evolving trade dynamics.
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