European auto makers face mounting losses if the U.S. decision to raise tariffs on Mexican exports by 5% isn’t settled soon
President Donald Trump speaks to the press before departing from the South Lawn of the White House in Washington, D.C. for the 2019 United States Air Force Academy Graduation Ceremony in Colorado Thursday May 30, 2019.European automakers face mounting hits to their profits if the U.S. decision to raise tariffs on Mexican exports to the U.S. by 5% isn’t settled soon, and their stock prices took a beating Friday with the Stoxx Europe 600 index losing almost 3.0% at 454.73.
In morning trading Friday in Europe Fiat Chrysler Automobiles was the hardest hit, off nearly 5%, while BMW fell nearly 2% and Volkswagen just over 2%.Clearly, this announcement has potential implications for the proposed FCA-Renault merger,” said Citi Research analyst Angus Tweedie. “Volkswagen also has material production facilities in Mexico – 3% of global production – but its scale means it is better insulated from the risk and we estimate a 3% potential impact on EBIT from the tariff, he said.
“Clearly this represents a worst case scenario and we could expect management teams to undertake significant restructuring to avoid such an outcome,” he said.
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