Germany's key equity index, the DAX, climbed for the sixth successive trading session on Tuesday, nearing a recovery from its declines in early April. This uptick mirrored broader global market movements as the U.S. administration under President Trump made additional adjustments to its tariff policies, alleviating worries about an impending economic downturn.
On Tuesday, U.S. President Donald Trump approved two measures designed to decrease the tariffs for car manufacturers. The White House announced his decision on Monday, with the formal documentation being executed following the close of European markets on Tuesday.
The initial executive order provided tariff relief by ensuring automakers wouldn’t face cumulative duties, like those imposed on steel and aluminum. "Layering these tariffs goes beyond what’s needed to meet our policy objectives," according to President Trump’s statement in the directive.
In a distinct announcement, Trump amended the 25% tariff rule for auto parts set to start on May 3rd. Under this new directive, manufacturers assembling vehicles within the U.S. can apply for a deduction equal to 3.75% of the suggested retail price during the initial year until April 30, 2026. The reduction benefit will then decrease to 2.5% in the subsequent year.
Trump informed journalists that these modifications aimed to provide car manufacturers with an opportunity to relocate their production facilities within the U.S., after significant pressure from business magnates. However, economists and experts caution that imposing such taxes could substantially hike up manufacturing expenses and cause car prices to rise by several thousand dollars. They contend that these adverse impacts would harm the American automotive sector, potentially resulting in workforce reductions and plant shutdowns.
Multiple international automakers such as Stellantis NV, Ford Motor, General Motors Co., Volkswagen AG, and Toyota Motor Corp. have announced production halts in both Canada and Mexico, or offered incentives to maintain customer loyalty amid declining profit margins and reduced sales figures.
Germany's automotive stocks rise as DAX approaches month-end peak.
Germany continues to be the top European car exporter to the U.S., having sold $24.8 billion (€21.8 billion) worth of automobiles stateside in 2024. The move by Trump to reduce car tariffs is thus viewed positively within Germany’s automotive sector and should help sustain an upturn in automobile-linked stock prices.
Since President Trump announced the 90-day suspension of reciprocal tariffs last month, German automotive stocks have experienced significant increases. The share prices of prominent car manufacturers like Mercedes-Benz, Volkswagen, and BMW have risen by approximately 20%, completely recovering from declines they faced at the beginning of the month.
Meanwhile, the DAX has been part of an extensive upswing, increasing by 21% since hitting bottom on April 7th and getting close to its highest point for the month. So far this year, the index has surged by 13%, positioning it as the top performer among significant global indices—quite a shift compared to the S&P 500, which has dropped by 5.5%. Currently, the DAX remains only 4% shy of reaching its historical peak set back in March.
"Several factors are driving interest in European assets: the decline of US exceptionalism, optimism about reduced tariffs on Europe, and the significant fiscal stimulus as Europe increases its military spending," noted Kyle Rodda, senior market analyst at Capital.com, in an email.
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