Category: UK News

shares in Germany’s Volkswagen Group fell 2.26% to €80,40, while Stellantis’ stock dropped 4.54% to €12,24, as investors weighed how Trump’s proposed tariffs on China, Mexico and Canada could hit business in Europe…reports Asian Lite News 

European automakers took a share price hit on Tuesday after Donald Trump threatened sweeping tariffs on China, Mexico and Canada. 

Late Tuesday morning, shares in Germany’s Volkswagen Group fell 2.26% to €80,40, while Stellantis’ stock dropped 4.54% to €12,24, as investors weighed how Trump’s proposed tariffs on China, Mexico and Canada could hit business in Europe. 

The President-elect said he would impost a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China as one of his first acts as president of the US. 

The US is the largest importer of goods in the world, with Mexico, China and Canada its top three suppliers according to the latest census data. The threatened tariffs – if implemented – risk pushing prices for food, autos and other goods in the US up. 

Shares in French car parts maker Valeo also dropped by 2.54%, while BMW stock declined by 1.36% following the update on Trump’s Truth Social platform. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” he wrote. 

According to several economic analyses, there is broad agreement that Trump’s previously proposed 10% universal tariff on all US imports may significantly disrupt European growth, intensify monetary policy divergence, and strain key trade-dependent sectors such as autos and chemicals. 

The long-term effects on Europe’s economic resilience could prove even more significant if tariffs lead to protracted trade conflicts, prompting the European Central Bank (ECB) to respond with aggressive rate cuts to cushion the impact. Data from the European Commission shows that the European Union exported €502.3bn in goods to the US in 2023, making up a fifth of all non-European Union exports. 

European exports to the US are led by machinery and vehicles (€207.6bn), chemicals (€137.4bn), and other manufactured goods (€103.7bn), which together comprise nearly 90% of the bloc’s transatlantic exports. 

ABN Amro analysts, including head of macro research Bill Diviney, warn that tariffs “would cause a collapse in exports to the US”, with trade-oriented economies such as Germany and the Netherlands most likely to be the hardest hit. 

According to the Dutch bank, Trump’s tariffs would shave approximately 1.5 percentage points off European growth, translating to a potential €260bn economic loss based on Europe’s estimated 2024 GDP of €17.4tn. 

Should Europe’s growth falter under Trump’s tariffs, the European Central Bank (ECB) may be compelled to respond aggressively, slashing rates to near zero by 2025. In contrast, the US Federal Reserve may continue raising rates, leading to “one of the biggest and most sustained monetary policy divergences” between the ECB and the Fed since the euro’s inception in 1999. 

The likely outcome: a weaker euro, which could help offset some competitive disadvantages for European exporters but would also increase import costs. 

Dirk Schumacher, head of European macro research at Natixis Corporate & Investment Banking Germany, suggests that a 10% tariff increase could reduce GDP by approximately 0.5% in Germany, 0.3% in France, 0.4% in Italy, and 0.2% in Spain. Schumacher warns that “the euro area could slide into recession in response to higher tariffs”. 

Shares of U.S. automakers General Motors and Ford Motor were down 7.5% and 1.7%, respectively. Toyota Motor’s U.S.-listed shares were down 1.7%. 

Among European automakers, Jeep maker Stellantis, and Volkswagen, were down about 4% and 2%. A basket of autos and parts stocks was the worst-performing sector in Europe, down about 1.8% versus a 0.6% fall for the broader STOXX 600. 

Last week, GM CFO Paul Jacobson said the automaker had some assets in Mexico. “We’re going to continue to work with the administration because I think our goal is very consistent with what the administration’s goal is in terms of U.S. jobs and what that can mean,” he told a Barclays conference when asked about potential tariffs. 

Ford CFO John Lawler said last week the automaker would have to see what level of tariffs were imposed and decide on pricing. In a note published last week, Evercore ISI said every 10% tariff on Mexico is a 20% earnings-per-share risk for GM, and 10% for Ford. 

“We estimate that each extra 1pp on tariff could impact pre-tax profit by ~Eu160mn or 1.4% of 2025 expectations,” Italian broker Intermonte said on Stellantis. About a quarter of vehicles sold by Stellantis in North America are made in Mexico. 

Canadian auto supplier Magna International’s U.S.-listed shares fell 3%, while peers Aptiv and Borgwarner fell about 2% each. “We view the tariff threats as more of a negotiating tactic to get the other countries to make concessions on various other issues such as illegal immigration,” said CFRA Research analyst Garrett Nelson. 

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National security adviser will travel to Washington in attempt to persuade US president-elect not to rip up deal…reports Asian Lite News

Keir Starmer’s national security adviser is to travel to Washington as the UK government tries to persuade Donald Trump not to rip up the Chagos Islands agreement, the Guardian has learned. 

Jonathan Powell, who negotiated the Chagos deal earlier this autumn, is drawing up plans to visit the US capital in the coming days, four government sources said. 

Powell, who worked for a decade as Downing Street chief of staff for the then prime minister, Tony Blair, is seeking early meetings with Trump’s team ahead of the president-elect’s inauguration on 20 January. 

One senior source said the trip, which may involve other government figures, would not be narrowly focused on the Chagos Islands but serve as an opportunity to introduce Starmer’s government to the incoming Trump administration. 

UK ministers are concerned that Trump will block the deal to cede control of the Chagos Islands, where the US and UK have a joint military base, to Mauritius. Diego Garcia, the island where the base is located, will remain under UK control for at least the next 99 years. 

The agreement was struck by Powell last month after two years of negotiations, which had been initiated by Rishi Sunak’s government. The US election result has thrown the handover into question, however. Trump’s pick for secretary of state, Marco Rubio, warned in October that the agreement posed “a serious threat” to US national security by ceding the islands to a country allied with China. 

Nigel Farage, the Reform UK leader, said this month that Trump’s team viewed the deal with “outright hostility” and would try to challenge it. “Diego Garcia was described to me by a senior Trump adviser as the most important island on the planet as far as America was concerned,” Farage told the Commons. 

Powell, who is about to take up the national security adviser role, has been in Mauritius this week where the government he negotiated with has suffered a landslide defeat amid a wiretapping scandal. In Washington, he will seek to persuade Trump’s advisers that the planned handover secures the future of the Diego Garcia base. 

UK ministers have insisted that uncertainty over the islands’ legal status threatened the base’s operation and that the deal had support from across the US security system. Joe Biden’s administration has offered its public backing to it. 

Stephen Doughty, the minister for North America, said this month that Trump’s administration would be briefed on the full details of the deal to “allay any concerns”. 

Although 11 rounds of negotiations for it were held under the previous government, several leading Conservatives have been critical of the agreement. 

Priti Patel, the shadow foreign secretary, has said it would “give away a key strategic asset” in the Indian Ocean. Tom Tugendhat, the shadow security minister, has claimed it could lead to China establishing its own military base in the Chagos Islands. Mauritius has long argued it was forced to give the Chagos Islands away in return for independence from Britain in 1968. About 2,000 people were forcibly displaced from their homes in the 1960s and 1970s in what has been described as a crime against humanity and one of the most shameful episodes of postwar colonialism. 

Five years ago the international court of justice issued an advisory opinion condemning the UK’s continued control over the Chagos Islands. David Lammy, the foreign secretary, has argued that without a deal a binding judgment against the UK seemed inevitable, jeopardising the future of the base. 

Stephen Doughty, a Foreign Office minister, was replying to Nigel Farage about the Chagos Islands. He said that, if the UK had not negotiated an agreement with Mauritius, “a legally binding decision against the UK [on sovereignty] seemed inevitable”. He said, “I fundamentally disagree with what [Farage] has had to say. Let me be absolutely clear, this government inherited a situation where the long-term secure operation of this crucial military base [Diego Garcia] was under threat. International courts were reaching judgments. International organizations were taking steps not to undermine Mauritian sovereignty, and this threatened the secure and effective operation of the base.” 

And, in the absence of a negotiated solution, a legally binding decision against the UK seemed inevitable. This would have threatened the secure and effective operation of the base and that was not sustainable. 

He also said that he looked forward to working with the incoming Trump administration and that he was confident that, when they were briefed on the details, they would realise it was not a threat to security. 

“We’re looking very forward to working with [the incoming Trump administration], and I’m sure that they will be being briefed on the full detail of this deal. And I am confident that the details of this arrangement will allay any concerns.” 

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