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By Giulio Piovaccari
MILAN (Reuters) -European automakers' shares jumped on Thursday after U.S. President Donald Trump gave carmakers a one-month reprieve from his punishing 25% tariffs on Canada and Mexico, with Chrysler-to-Fiat maker Stellantis pledging more American-made cars.
Stellantis, whose shares popped 1.5%, thanked Trump for the tariff pause, and pledged to help the U.S. president's America First aim of building more cars in the United States.
"We share the President's objective to build more American cars and create lasting American jobs. We look forward to working with him and his team," Stellantis said in a statement.
The Trump administration, which slapped tariffs on its North American neighbors this week, eased the measures for carmakers after one of the steepest skids in nearly three months on Wall Street as the trade tensions spread worries among markets and investors.
The European automakers and components index was up around 1.5% on Thursday, with Porsche Volkswagen, BMW and Volvo Cars up between 2.5-3.5%. Mercedes jumped over 4%.
Earlier this week Stellantis shares had slumped to 10.84 euros, their lowest since the firm was created in early 2021 from the merger of Fiat Chrysler and Peugeot owner PSA.
European carmakers including Volvo have said they may move production of some models to the United States depending on the U.S. tariffs. Trump has also floated potential "reciprocal" tariffs on Europe that could hit next month.
"The short-term problem for the automotive industry is that supply chains cannot be relocated domestically or new plants cannot be built in a month," said Commerzbank economists Bernd Weidensteiner and Christoph Balz in a note.
"It's therefore foreseeable that the pain in the automotive industry will increase significantly in the coming months when many important preliminary products become more expensive. Consumers face the threat of significantly higher prices."
SHIFTING PRODUCTION
Besides its U.S. plants, Stellantis operates facilities in Mexico and Canada. The company imports from Mexico and Canada around 40% of the vehicles it sells in the U.S., according to analyst estimates.
According to Stifel Research, the tariffs on Mexican and Canadian imports could impact around 16 billion euros ($17.3 billion) of Stellantis revenue in 2025 and the group would lose around 40% of its operating profit in a worst case scenario if it was forced to bear the full tariff impact.
The U.S. is traditionally the most profitable market for Stellantis, but falling sales and bloating inventories there cost the group a 64% operating profit drop and a 6 billion euro cash burn last year.