The European Union (EU) has threatened the United States of a tit-for-tat situation should Trump impose a 25% tax on foreign steel. This is especially true as the EU would propose a retaliatory tariff of 25% on a range of consumer, agricultural and steel products imported from the country, valued about 2.8 billion euros ($3.5 billion).
The targeted products include shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around 1 billion euros; orange juice, bourbon whiskey, corn and other agricultural products totaling 951 million euros; and steel and other industrial products valued at 854 million euros.
In a counter-attack, Trump warned the EU that he would impose a 25% penalty on European car imports if the bloc carried out punitive measures against the metals tariffs. He reiterated his commitment to levying tariffs on steel and aluminum, saying that the United States has poor trading conditions with other nations, including those in the EU. According to the latest data from the European Automobile Manufacturers’ Association (ACEA), EU and U.S. auto-related trade account for around 10% of total trade between the two regions.
Intensifying talks of a trade war between Trump and the EU have been unnerving investors lately, putting many stocks and ETFs in focus. Here, we have discussed some.
The penalty on European car imports could spell trouble for popular car manufacturers like Volkswagen and BMW, affecting the German auto industry. These luxury carmakers also manufacture cars in America, shipping billions of dollars abroad. According to Germany’s Association of the Automotive Industry, this country produced 854,000 vehicles in the United States in 2016, marking a four-fold increase in about seven years. More than 60% of those were exported.
As such, iShares MSCI Germany ETF (EWG – Free Report) targeting the German stock market, will likely feel the pressure. The ETF has a Zacks Rank #2 (Buy) with a Medium risk outlook.