European automaker shares fell across the board Friday after Germany's Economy Minister warned of a potential legal challenge to U.S. President Donald Trump's border tax plans ahead of a meeting with Angela Merkel in Washington.
The Stoxx 600 Europe Automobiles and Parts Index was quoted 1.4% lower in the opening hour of trading, with marked declines seen for German automakers Volkswagen AG (VLKAY) , BMW (BMWYY) and Daimler (DDAIY) . In Paris, Europe's second-biggest carmaker, PSA Peugeot (PUGOY) , was trading 1.9% lower while domestic rival Renault (RNLSY) extended its declines by a further 0.91% amidst a storm of allegations related to diesel emissions cheating.
Economy Minister Brigitte Zypries told Germany's' Deutschlandfunk radio that Trump's aim to apply a 35% tax on cars manufactured in Mexico and imported into the United States could elicit a reaction from the German government via the World Trade Organisation.
"There are procedures laid out there because in the WTO agreements it is clearly laid out that you're not allowed to take more than 2.5% taxes on imports of cars," Zypries said.
Chancellor Merkel and President Trump are scheduled to meet later Friday in Washington to discuss trade, climate change and European security, with the former likely to ignite tensions between the two leaders.
Last month, Trump's senior economic adviser, Peter Navarro, said Germany was using a "grossly undervalued" euro to gain competitive advantage in export markets and accused Europe's biggest economy of being a currency manipulator.