European Car Manufacturers' Stocks Surge Following US-Japan Trade Agreement

According to Reuters, European car manufacturers' stocks saw a significant rise on July 23, driven by positive news regarding the trade agreement between the US and Japan. This trend mirrored the surge in stock prices of some Asian car manufacturers, as market expectations grew for a similar agreement between the EU and the US. Under the US-Japan trade agreement, the US will reduce tariffs on cars imported from Japan from a proposed 25% to 15%. This news led to a sharp increase in the stock prices of Japanese and South Korean car manufacturers; Swedish automaker Volvo's shares surged by about 7%, reaching their highest point since mid-May. German manufacturers such as Porsche, BMW, Mercedes-Benz, and Volkswagen saw stock price increases ranging from 3.8% to 6.8%, while Stellantis and Renault's shares also rose by approximately 3%. As of 07:06 GMT on July 23, the European automotive stock index increased by 3.4%, leading all industry indices, while the European STOXX 600 index only rose by 0.9%. The European Commission is working towards reaching a trade agreement framework with the US before the August 1 deadline, after which US President Trump has announced substantial tariff increases. Industry insiders and trade officials revealed that as part of the negotiations, the EU is discussing a range of measures to protect the European automotive industry with the US, including lowering existing tariffs, setting import quotas, and providing tax rebates for EU car exports to the US. Citigroup analysts noted that the US's reduction of tariffs on Japan, a major car-exporting country, without setting export limits is symbolic and may influence negotiations with the EU and South Korea. According to the European Automobile Manufacturers Association (ACEA), in 2024, Europe exported 758,000 cars to the US, worth €38.9 billion (approximately $45.57 billion), which is more than four times the number of cars the US exported to Europe. However, an industry group representing manufacturers like Stellantis expressed dissatisfaction with the US-Japan trade agreement, arguing that the trade mechanism is unfair: while the US will reduce tariffs on cars from Japan, it will maintain the 25% tariff on cars from Canada and Mexico.