Stocks Slide and Dollar Jumps as Trump’s Tariff Threats Become Reality

European carmakers sell off the most ahead of imminent tariffs on EU goods.

Lukas Strobl 3 February, 2025 | 3:03PM
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Global stock markets retreated at Monday’s open while the US dollar surged after US President Donald Trump imposed tariffs of 25% on Canada and Mexico while reaffirming his plans to do the same with Europe.

Citing a wide trade deficit with the European Union, Trump said over the weekend that tariffs on the bloc “will definitely happen”.

US markets open lower, following similar moves in Asia and Europe.

According to Morningstar’s chief European strategist Michael Field, “the the writing is on the wall”.

“That Donald Trump has no qualms about imposing them on his nearest neighbors, means that we too should be bracing for impact.”

European stocks had enjoyed a bull run during the month of January, hitting an all-time-high on Friday, as end-of-year earnings have surprised to the upside. Until the weekend, some investors had held out hope that tariffs on Europe would not materialize.

The market volatility at the start of the week follows the DeepSeek-related selloff last Monday.

Automakers Lead European Stocks Lower

The Stoxx Europe 600 fell on Monday, led lower by automakers including Stellantis STLAM, down 6.34%, Volkswagen VOW3, down 4.5%, and Porsche P911, down 5.35%. Commercial vehicle maker Daimler Truck DTG fell 6.73%.

Not all stocks in the sector will be similarly affected, Morningstar automotive analyst Rella Suskin explains.

“Most of the auto manufacturers have been diversifying their manufacturing base for many years now to match production to the region in which vehicle sales are made. Mercedes and BMW have done this best in terms of matching their US sales to production.

“In fact, BMW’s US plant actually exports product to Germany. While Stellantis has a substantial North American production base, a significant portion is in Mexico, thus exposed to tariffs. Volkswagen has a lot of catching up to do, particularly for its Porsche and Audi brand.”

Volkswagen’s premium brands, Audi and Porsche, currently produce all their vehicles outside the US, making them particularly vulnerable to costly duties.

In the Netherlands, financial services company Adyen ADYEN saw a 3% loss. The North America region makes up around 25% of Adyen’s revenue and was targeted as a growth region by the company in terms of both volume and margins.

The three chip stocks in Amsterdam’s main AEX index, chip equipment manufacturers ASML ASML, BE Semiconductor Industries BSI, and ASM International ASM, saw losses of 2%, 5.6% and 2%. ASML has been hit in recent years by increasing political pressure from the US to limit or block deliveries of their newest technology to China. These stocks sold off sharply last week amid AI volatility, but recovered towards the end of the week.

Meanwhile, European banks exposed to Latin America weighed on the sector. Spain’s BBVA BBVA lost nearly 7% in trading in Madrid.

In the UK, the FTSE 100 was off by more than 1.5%. US-exposed stocks such as Croda CRDA, Ashtead AHT and Diageo DGE were among the the biggest fallers. According to FactSet, chemicals firm Croda has a 21% revenue exposure to the US, equipment rental firm Ashtead has a 81% exposure and drinks maker Diageo has a 36% exposure.

Dollar Jumps Against Peso, Canadian Dollar, and Euro

The US dollar jumped against a basket of exposed currencies on Sunday: It moved from MXN 20.68 against the Mexican peso to MXN 21.09 and from CAD 1.45 to CAD 1.47 against the Canadian dollar. Against the euro, the US dollar rose to EUR 0.98, from 0.97, approaching parity, a situation last seen in 2022.

Cryptocurrencies Shaken by Risk-Off Sentiment

Bitcoin fell to $92,800 Monday, hitting a three-week low before recovering to $96,546 as fears of a new global trade war weighed on risk assets. This is a significant fall after the coin touched a record high of more than $107,000 on Jan. 20, when Trump was sworn in as president, having made positive comments on crypto.

The Global X Blockchain ETF was one of the biggest ETF fallers in Europe on Monday morning, dropping more than 7%.

Smaller cryptocurrencies were also hit, with Ethereum dropping to $2,459 Monday morning, from $3,425 on Friday night. The CoinDesk 20 index, which measures the largest 20 digital assets by market cap, dropped about 20% in the previous two days. Cryptocurrencies trade around the clock, including on weekends.

Antje Schiffler, Valerio Baselli, Fernando Luque, Robert Van Den Oever, Sunniva Kolostyak and James Gard contributed to this story.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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Lukas Strobl  is the editorial manager for EMEA at Morningstar.

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