Investing.com - European automotive stocks climbed on Tuesday after U.S. President Donald Trump reportedly floated potentially granting exemptions to car-related tariffs already in place.
According to Reuters, Trump said in the White House on Monday that he was considering modifying current 25% levies on foreign autos and auto parts from Canada, Mexico and other countries, which analysts have predicted could increase car costs by thousands of dollars.
Trump said the auto industry needs "a little bit of time because they’re going" to make cars in the United States, Reuters said.
Shares in Germany’s Volkswagen (ETR:VOWG_p), BMW (ETR:BMWG), and Mercedes-Benz (OTC:MBGAF) Group all rose in early European trading, while Jeep-owner Stellantis (NYSE:STLA) gained over 4% in Milan trading. The industry-wide Stoxx 600 Automobiles & Parts index also added more than 2%.
The rally echoed an uptick in the stock prices of General Motors (NYSE:GM) and Ford Motor (NYSE:F), which ended higher by 3.5% and 4.1%, respectively, on Monday.
Analysts at Morgan Stanley also said the report would be positive for Japanese automakers, including Toyota Motor (NYSE:TM) Corp (TYO:7203), Honda (NYSE:HMC), and Mitsubishi Motors (OTC:MMTOF). Shares in these firms jumped on Tuesday.
Several automakers utilize a highly-integrated North American supply chain that often sees parts cross borders multiple times before finished cars arrive in U.S. showrooms. Trump’s tariffs have threatened to disrupt this flow of goods and cloud the outlook for many car companies.
In a statement on Monday quoted by Reuters, the head of the American Automotive Policy Council, which represents GM, Ford and Stellantis, said that they "share the President’s goal to increase American automotive production, and we appreciate the ongoing dialogue with the Administration."
Trump’s suggestion of an exception for carmakers comes after the White House temporarily paused levies on a wide range of electronics imports, largely from China, late on Friday. The action has helped to somewhat bolster market sentiment, although Trump has vowed to place more duties on sectors like semiconductors as soon as next week.
(Reuters contributed reporting.)