Daimler AG (DMLRY) shares traded sharply lower in Frankfurt Monday after the luxury automaker issued a surprise 2019 profit warning linked to the increased cost of meeting European and global emissions standards.

Daimler said it now sees second quarter earnings coming in around the same levels as last year, down from a previous forecast of a modest advance, and expects profits for the full 2019 year to be "in the magnitude of the previous year". The profit warning followed a Sunday announcement that Daimler will need to recall 60,000 diesel-powered Mercedes vehicles after German regulators found them to be fitted with software that could distort emissions tests.  

"Increase of provisions for various ongoing governmental proceedings and measures relating to Diesel vehicles by a high three digit million amount will affect Daimler's second quarter 2019 earnings and be taken into account in the Group EBIT," the carmaker said in a brief statement published on its website. "Relevant for the reassessment is an increase in expected expenses in connection with various ongoing governmental proceedings and measures with regard to Mercedes-Benz diesel vehicles."

Daimler shares were marked 4.6% lower in the opening hours of trading in Frankfurt to change hands at €47.32 each, a move that trims the stock's year-to-date advance to around 4.7%. Domestic rivals BMW AG (BMWYY) and Volkswagen AG (VLKAY) were also caught in the downdraft, falling 1.2% respectively, while the region-wide Stoxx 600 Europe Automobiles and Parts index was marked 1.4% lower at 484.85.

European carmakers have been under pressure from comments made during  President Donald Trump's State of the Union Speech to Congress earlier this year, when he urged lawmakers to pass the United States Reciprocal Trade Act, "so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the exact same product that they sell to us."

TheStreet's founder, Jim Cramer, thinks Trump's use of tariffs to extract concessions on non-trade issues, such as with Mexico and immigration, raises huge risks for European carmakers, which could find themselves on the business end of fresh U.S. levies if the President were to use tariffs to compel countries such as Germany and France to increase their NATO spending commitments.

Trump has repeatedly threatened to apply tariffs on European-made cars sold in the United States, but postponed a decision to use section 232 of the Trade Expansion Act as a pretext to apply the 20% levy until later in the fall.

The EU exported around 1.155 million cars to the U.S. market last year, according to the European Automobile Manufacturing Association, with total value of just over €37.3 billion ($41.8 billion). The U.S, in contrast, moved only 267,653 cars in the other direction, a value of just €5.5 billion but still nearly 20% of the sector's entire international export base.