European cars and clean energy feel the effects of Trump 2.0 plants

Authors: Danilo Masoni and Alun John

MILAN/LONDON (Reuters) – Shares of some European carmakers and renewable energy companies sold off for a second day on Tuesday, as concerns about potential threats to U.S. politics grew after a failed assassination attempt on his life boosted Donald Trump’s presidential hopes.

Trump’s selection of JD Vance as his vice presidential running mate in the race for the top job in Washington has heightened concerns, forcing investors to sell stocks deemed at risk.

Shares of European carmakers and luxury companies were already looking volatile given the recent escalation of trade tensions between the European Union and Beijing.

Vance said in a television interview Monday that the “biggest threat” to the United States right now is China, not Russia’s war in Ukraine.

Vance’s harsh words on China and opposition to more aid for Ukraine have reinforced the view that trade barriers will rise if he and Trump win, leaving Europe’s export-driven economy vulnerable.

“This is another step away from the Republican Party’s past image as ‘business friendly’ and a step closer to the possibility that the MAGA movement will continue after Trump, a movement that was previously thought to have a limited lifespan,” said Lindsay James, investment strategist at Quilter Investors.

“NATO engagement will be even more uncertain, as will support for Ukraine, risks that go beyond financial markets but are captured in the notion of a ‘risk premium’ that is certain to rise in European equities,” James said.

Among European automakers that rely heavily on exports for growth, Porsche AG was the biggest loser Tuesday, falling as much as 5.7% in Frankfurt. Traders linked the decline to the view that a tougher U.S. stance on China could create another headwind for the economy, hurting companies that do business there. Investors are also concerned about Trump’s possible tariffs on European vehicles, which are already facing retaliation from Beijing over EU tariffs on Chinese electric imports. Barclays forecasts a 20% U.S. tariff on European carmakers could hurt the euro. Volvo Car, Mercedes and parts suppliers Forvia and Valeo fell between 1.6% and 3.3%. “Given Trump’s platform of putting America first, it’s hard to imagine a Trump presidency being really good for asset markets outside the U.S.,” said Michael Metcalfe, head of macro strategy at State Street. “And when you’re talking about huge tariffs on China, it’s hard to see that as anything but negative for Europe,” he said.

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The European regional index STOXX 600 fell 0.4%. Over the past two months, STOXX has lost about 1%, while the S&P 500 has gained more than 6%.

Some European clean energy stocks also came under pressure, extending Monday’s declines on concerns that Trump would reduce support for renewables in favor of fossil fuels.

Wind energy companies Orsted and Vestas Wind fell 3.2% and 2.3% respectively, having fallen 5.5%-6% a day earlier.

Citi on Tuesday removed Vestas shares from its “buy” rating list, saying recent polls could boost Trump’s chances.

(Additional reporting by Samuel Indyk in London, Zuzanna Szymańska in Berlin and Christoph Steitz in Frankfurt; Editing by Amanda Cooper and Arun Koyyur)