Stock prices plummet 1.7% on the DAX index due to escalating trade tensions and tariff worries
German stocks experienced a sharp decline on Friday, with the benchmark DAX plummeting 1.71%. This heavy selling across the board was partly due to the recent U.S. tariffs under President Donald Trump and his call for drug price reductions.
The tariffs have sent shock waves through the global economy, affecting EU exporters to the U.S., including Daimler Truck Holding, Siemens Energy, and SAP. The increased costs and uncertainties resulting from these tariffs may squeeze margins for these companies and potentially reduce export volumes if U.S. demand weakens or domestic U.S. production replaces imports.
Siemens Energy and SAP, as major German industrial and technology firms, may also face higher costs or demand challenges due to trade disruptions. The broader negative sentiment on stocks tied to U.S. regulatory intervention, particularly in pricing, could indirectly affect their valuations and market confidence.
Trump’s urging of pharmaceutical companies to cut drug prices caused a plunge in healthcare stocks, exemplified by Denmark's Novo Nordisk dropping nearly 5%. While Siemens Energy and SAP are not pharmaceutical companies, the negative sentiment on stocks tied to U.S. regulatory intervention could indirectly affect their valuations and market confidence.
J.P. Morgan anticipates some margin compression for exporters, but the final impact depends on whether U.S. demand falls or if U.S. producers replace imports effectively. Overall, euro area growth is expected to slow modestly in the second half of 2025, which may weigh on German corporate earnings.
Daimler Truck Holding, which operates heavily in vehicle export markets, is particularly vulnerable to tariff impacts. The company trimmed its 2025 forecast due to persisting market weakness in North America, leading to a nearly 6% decline in its stock.
On a positive note, Bayer bucked the trend and gained about 3.2%, after raising its 2025 sales forecast. E.ON and Commerzbank, the two other gainers in the benchmark index, were up marginally.
Eurozone manufacturing moved closer to stabilization in the month, with the HCOP Eurozone Manufacturing PMI coming in at 49.8, up from 49.5 in June. This suggests that the manufacturing sector may be moving towards a state of stability.
In summary, the U.S. tariffs and drug price pressure have contributed to declines in European and German stock indices, primarily through margin pressure, export challenges, and investor uncertainty surrounding U.S. policy interventions. Despite near-record highs in some markets, analysts warn of delayed economic impacts and a likely modest slowdown in global growth ahead.
Investing in German businesses, such as Daimler Truck Holding and Siemens Energy, may face challenges due to the increased costs and uncertainties caused by U.S. tariffs. The recent call for drug price reductions by President Donald Trump has also created negative sentiment on stocks tied to U.S. regulatory intervention, potentially affecting the valuations and market confidence of these companies. Despite these challenges, some industries, like pharmaceuticals, may still see growth opportunities, as evidenced by Bayer's stock increase. However, the overall global growth is expected to slow modestly in the second half of 2025, potentially impacting corporate earnings across various industries, including technology, finance, and general news sectors. sports, and sports-related businesses may not be directly impacted by these economic changes.
