U.S.-Japan trade agreement benefits auto industry, resulting in growth for DAX, while SAP experiences decreased pace
The ongoing trade negotiations between the United States and Europe are reportedly nearing a deal, with a likely conclusion before the August 1, 2025, deadline. The proposed framework includes a 15% tariff on goods imported from the European Union, including European cars, a central point of contention in the discussions.
If the deal goes through, the German automotive sector could face significant challenges. Germany's economy is heavily reliant on its automotive exports, with global brands like Volkswagen, BMW, and Mercedes-Benz leading the way. A 15% tariff on European cars imported into the US would likely increase costs and reduce direct competitiveness in the US market, potentially lowering sales and profitability for these companies. This could, in turn, weigh on the German stock market, given the large representation of automotive firms in major indices like the DAX.
The uncertainty during negotiations and the threat of tariffs could also provoke volatility and investor caution in the sector. However, if the deal also includes tariff reductions in other sectors or if currency adjustments favourably, some negative impacts might be mitigated.
In recent trading, the German stock market showed signs of recovery, with the DAX and MDAX gaining significantly. Companies like Daimler Truck, Mercedes-Benz, BMW, Volkswagen, Porsche AG, and Porsche SE saw increases in the DAX. However, SAP's shares fell 4.1 percent on Wednesday following the company's mixed Q2 results, while Texas Instruments and ASM International provided weak outlooks, weighing down the semiconductor sector. Infineon continued its downward trend, falling 3.5 percent.
Investors are hopeful for a similar deal between the US and Europe after the trade agreement between Japan and the US. They are now hoping for a similarly constructive solution between the EU and the United States. Siemens Energy's shares gained 6.4 percent, benefiting from an upgrade in the US competitor GE Vernova's outlook.
It is important to note that exact outcomes will depend on the final deal terms, any concessions made, and market reactions post-agreement. The US tariffs on vehicles and components remain at 15% following the trade agreement with Japan.
In conclusion, the potential US-EU trade agreement, if it includes a 15% tariff on EU goods, including cars, could have a significant impact on the German automotive sector and the broader German stock market. The uncertainty and potential consequences are causing volatility in the market, but a constructive solution between the EU and the United States is what investors are now hoping for.
- The 15% tariff on European cars, if implemented, could lead to increased costs and reduced competitiveness for German automotive giants like Volkswagen, BMW, and Mercedes-Benz in the US market, potentially impacting their sales and profitability.
- The ensuing volatility in the German stock market, given the large representation of automotive firms in indices like the DAX, could weigh on its overall performance, especially if the proposed trade deal between the US and Europe includes a 15% tariff on EU goods.
