Europe markets fall, autos down; Trump tariffs go into effect

European markets closed sharply lower on Tuesday as global investors brace for the global impact of fresh U.S. tariffs on Mexico, Canada and China, along with retaliatory action.

The Stoxx 600 index provisionally closed 2.2% lower, marking its biggest daily drop since August last year. The Stoxx 600 basket of automotive stocks — one of the sectors expected to be most impacted by the new duties — fell 5.7%.

Among the companies hit were Dodge-maker Stellantis, closing down 10%, and Mercedes Benz, lower by 5%.

French defense firm Thales jumped as much as 12% in earlier deals after reporting higher income and revenue for the full-year 2024 period. Shares closed 2.5% higher. The company was among many European military manufacturers to gain ground on Monday on expectations of higher regional spending.

The prospect of tariffs has rattled investors amid concerns that they will reignite inflation in the U.S. and escalate a global trade war.

On Monday, all three major U.S. indexes dropped into negative territory after Trump confirmed in the afternoon that the U.S.′ 25% duties on Canada and Mexico would go into effect the following day and that that there was “no room left” for the two nations to negotiate these new import tariffs. Trump also slapped an additional 10% tariff on Chinese goods.

In retaliation, China announced overnight that it would impose additional tariffs of up to 15% on some U.S. goods and restrict exports to 15 U.S. companies.