European automaker stocks experienced a significant downturn Monday morning following renewed tariff threats from US President Donald Trump, escalating tensions over Greenland.

Mercedes-Benz AG shares saw the steepest decline, plummeting as much as 6.7% in Frankfurt trading. BMW AG followed closely, dropping 7%, while Volkswagen AG shares slipped 5.4%. Even Porsche AG, which does not have manufacturing operations in the United States, was affected, falling by as much as 4.9%.

The market reacted swiftly to the President's statements, interpreting them as a potential disruption to transatlantic trade. Investors are particularly sensitive to tariff announcements, as they directly impact the profitability of European automakers who rely heavily on exports to the US market. The automotive industry operates on relatively thin margins, and even small tariff increases can significantly erode earnings.

The European automotive sector is a cornerstone of the European economy, employing millions and contributing substantially to the region's GDP. Companies like Mercedes-Benz, BMW, and Volkswagen have established global supply chains and rely on free trade agreements to maintain their competitiveness. These companies have invested heavily in US manufacturing facilities, but a significant portion of their US sales still come from vehicles manufactured in Europe.

The future outlook for European automakers remains uncertain, heavily dependent on the trajectory of US trade policy. Further tariff hikes could force these companies to reassess their global production strategies, potentially leading to higher prices for consumers and reduced investment in the US. The situation highlights the vulnerability of global businesses to geopolitical risks and the importance of stable trade relations.