European automakers including BMW, Volkswagen, and Stellantis saw significant declines in early trading as U.S. President Donald Trump signaled new tariffs on imported vehicles and auto parts. The market reaction followed a pattern of trade tension that has persisted since 2023.
- BMW stock dropped 4.7%, Volkswagen fell 5.2%, Stellantis declined 6.1% on January 19, 2026
- Proposed tariffs: 25% on imported passenger vehicles, 10% on auto parts
- European automakers exported 1.8 million vehicles to the U.S. in 2025, worth $87 billion
- Tariff could reduce European market share in the U.S. by up to 30% within two years
- BMW plans to increase production at its South Carolina plant by 20% by 2027
- DAX index dropped 1.6% amid sector-wide losses
European automakers plunged in early trading on January 19, 2026, as President Donald Trump announced plans to impose a 25% tariff on all imported passenger vehicles and a 10% levy on auto components, citing national security and trade imbalance concerns. The announcement triggered immediate sell-offs across the region’s auto sector, with BMW (BMW.DE) dropping 4.7%, Volkswagen (VOW3.DE) falling 5.2%, and Stellantis (STLA.MI) shedding 6.1% by mid-morning in Frankfurt and Paris markets. The proposed tariffs would affect nearly all European-made vehicles exported to the United States, including premium models from BMW and Mercedes-Benz, as well as mass-market offerings from Volkswagen Group brands like Audi and Škoda. The U.S. remains a critical export market, with European automakers shipping over 1.8 million vehicles to the U.S. in 2025, generating approximately $87 billion in revenue. The new duty would significantly erode profit margins, especially for high-volume producers reliant on cross-Atlantic trade. The market response reflects growing investor anxiety over the potential for a broader trade war. Analysts estimate that a 25% tariff on vehicles could reduce the U.S. market share of European manufacturers by up to 30% over two years, forcing companies to either absorb costs—leading to lower earnings—or raise prices, risking reduced demand. Some automakers are already exploring shifting production to North America, with BMW confirming plans to increase output at its plant in South Carolina by 20% by 2027. Investors are now assessing the risk of further escalation. The German DAX index declined 1.6% at the open, with the automotive sector dragging down the broader market. The volatility underscores the sensitivity of capital markets to geopolitical trade policy, particularly in industries with complex global supply chains.