Auto shares feel the heat as tariff war escalates

Global automakers’ shares fell as the United States and China announced heavy tariffs on imported vehicles.

In Europe, German auto giants BMW and Mercedes-Benz once dropped about 3 percent both in Europe, before narrowing the fall to less than 2 percent.

Stellantis and Valeo also declined.

It comes after China signaled it’s ready to unleash tariffs as high as 25 percent on imported cars with large engines, as trade tensions escalate with the US and European Union.

The China Chamber of Commerce to the EU said it was informed about the potential move by “insiders,” according to a statement posted on X, formerly known as Twitter. The levies would affect European and US carmakers and have a “significant” impact on relations with the EU, it added.

Later, the US Trade Representative’s office said that some of the steep tariff increases on an array of Chinese imports including electric vehicle batteries, computer chips and medical products will take effect on August 1.

US President Joe Biden will keep tariffs put in place by his Republican predecessor Donald Trump while ratcheting up others, including a quadrupling of EV duties to over 100 percent and doubling the duties on semiconductor tariffs to 50 percent.

The Trade Representatives office said a 30-day public comment period will close June 28. They are seeking comments on the effects of the proposed tariff hike on the US economy, including consumers.

The new measures affect US$18 billion (HK$140 billion) in imported Chinese goods including steel and aluminum, semiconductors, electric vehicles, critical minerals, solar cells and cranes, the White House said.

The EV figure, while headline-grabbing, may have more political than practical impact in the US, which imports very few Chinese EVs.

But Stellantis chief executive Carlos Tavares warned tariffs on Chinese vehicles imported to Europe and the United States are “a major trap for the countries that go on that path” and will not allow Western automakers to avoid restructuring to meet the challenge from lower-cost Chinese manufacturers.