(Reuters) - European shares sank to a more than three-month low on Friday, led by carmakers Volkswagen (DE:VOWG_p) and Fiat Chrysler after President Donald Trump opened a new front in global trade tensions by promising tariffs on Mexican imports.
Trump said all Mexican goods would face a 5% tariff from June 10 until illegal immigration is stopped, threatening to disrupt supply chains at a time when investors are again worrying about the threat of recession.
A worse than expected batch of Chinese data added to the dour mood, sending the pan-European STOXX 600 0.9% lower by 0708 GMT.
All European sectors were in the red, as investors dumped stocks in favor of the safety of government bonds and Germany's DAX, which is particularly vulnerable to trade risks, dropped 1.3% to a two month low.
The European auto index fell 2.7%, driven by 3% falls in both Volkswagen and Fiat Chrysler, who have significant exposure to Mexico.
Spanish banks Santander (MC:SAN), Sabadell and Bilbao, which all have a sizable presence in Mexico, slid between 3.6% and 1.8%.