German stock markets recoup April's declines following Trump's exemption from auto tariffs.
In a nutshell, the stock markets in Germany have surged since Trump's announcement of a 90-day halt on reciprocal tariffs—nearly erasing all losses from April. The auto stocks are particularly booming, thanks to Trump's auto tariff relief, which is anticipated to sustain the broader market rally.
The DAX, Germany's benchmark stock index, has climbed six days in a row, edging closer to recuperating all losses from early April. Global market trends have been on an upswing ever since the Trump administration changed its tariff policies, dampening fears of an impending recession.
Last Tuesday, Trump signed two decrees tailored to reduce the burden of tariffs on automakers. The White House confirmed Trump's intentions a day before, while the official documents were signed after European markets shut down on Tuesday.
The first executive order waived extra duties, stating that the combined levies were more than necessary for achieving the intended goals. In another decree, Trump revised the 25% tariff on auto parts, set to commence on the 3rd of May, allowing American-made vehicles to get a 3.75% rebate on their sales price during the first year, valid until April 2026. This discount will be reduced to 2.5% in the following year. Trump expressed that these changes were aimed at affording automakers time to shift their production to the U.S., in response to intense lobbying by industrial leaders.
Economists and analysts had warned that such tariffs would substantially hike manufacturing costs, inflate vehicle prices, and ultimately harm the U.S. auto industry, leading to factory closures and job losses.
Major car manufacturers, such as Stellantis NV, Ford Motor, General Motors Co., Volkswagen AG, and Toyota Motor Corp., have already set production pauses in Canada and Mexico, or inventive discounts to maintain customers amidst the risks of dwindling profit margins and weaker sales.
Germany, being the leading European car exporter to the U.S. (with €21.8 billion worth of vehicles exported to America in 2024), stands to gain significantly from Trump's decision to ease car tariffs, likely propelling a comeback in automotive-related stocks.
German auto stocks have shown remarkable growth since Trump's tariff hiatus was announced three weeks back. Shares in big-name automakers like Mercedes-Benz, Volkswagen, and BMW have soared by around 20% during this time, completely reversing their losses earlier in the month. Simultaneously, the DAX has capitalized on a broader rally, gaining 21% from its low on the 7th of April and nearing its monthly high. Since the beginning of the year, the index has risen by 13%, making it the top-performing major index worldwide—a stark contrast to the S&P 500, which has declined by 5.5%. The DAX currently stands just 4% below its all-time high recorded in March.
As European assets garner traction due to the end of U.S. exceptionalism and the promise of easing trade tensions, Kyle Rodda, senior market analyst at Capital.com, wrote in an email, "European assets are certainly gaining traction for several reasons: … the fiscal impulse in Europe as it remilitarizes will be historically strong."
- Whatsapp messages circulated on Tuesday confirmed that Trump had signed two decrees, aimed at reducing tariffs on automakers, which could significantly benefit German auto stocks.
- The benchmark stock index, the DAX, has mirrored this growth, climbing six days in a row since Trump announced the tariff hiatus, potentially recuperating all losses from early April.
- Economists and analysts, who had earlier warned that high tariffs would harm the U.S. auto industry, were silenced by Trump's decision to alter the 25% tariff on auto parts, a move that could likely propel a comeback in automotive-related stocks, especially in Germany, the leading European car exporter to the U.S.
