Shares of Europe’s major carmakers tumbled sharply on Monday, reflecting investor anxiety over U.S. President Donald Trump’s pledge to impose tariffs on multiple European countries in a bid to acquire Greenland.

The Stoxx Europe Automobiles and Parts index fell 2.75% by mid-morning in London, extending losses from early trading and highlighting the sector’s acute vulnerability to geopolitical shocks.

Germany’s automotive giants bore the brunt of the sell-off. Volkswagen, BMW, and Mercedes-Benz Group shares declined between 3.4% and 4.7%, while Porsche lost 4.2%. Italian luxury carmaker Ferrari dropped 2.3%, touching a 52-week low, signaling that even premium brands with strong pricing power are not immune to global trade tensions. Stellantis, the multinational automaker behind Jeep, Fiat, Peugeot, and Chrysler, fell 1.4%, reflecting some diversification across regions, but still showing sensitivity to cross-border supply chain disruption.

Trump’s Tariff Threats

The stock market reaction follows Trump’s weekend announcement that tariffs of 10% would be imposed starting February 1 on the U.K., Denmark, Norway, Sweden, France, Germany, the Netherlands, and Finland. These levies would rise to 25% from June 1 if Washington’s Greenland acquisition demands are not met. Investors reacted nervously to the blending of geopolitical objectives with trade policy, noting that such moves heighten uncertainty over the rules of engagement and potential escalation.

Why Automakers Are Vulnerable

The automotive sector is highly globalized, with complex supply chains crossing multiple borders. European carmakers often import components from several countries before final assembly, meaning that tariffs at any point could increase production costs, disrupt logistics, and squeeze margins. The industry is already facing structural pressures, including the high cost of electrification, stricter emissions regulations, and intensifying competition from Chinese EV manufacturers expanding into global markets.

Analysts warn that even if companies can mitigate direct costs, prolonged uncertainty could delay major investment projects such as battery plants, EV production facilities, and new model rollouts. For example, Volkswagen and Stellantis have made substantial capital commitments to electrify their fleets in Europe and North America; tariffs could necessitate costly adjustments in sourcing and regional production strategies.

Second-Order Effects on European Economies

The automotive sector is a key driver of European exports and employment, particularly in Germany, Italy, and France. Weakness in the industry could ripple through related sectors, including steel, electronics, and logistics, compounding broader economic uncertainties. Trade shocks also risk undermining investor confidence, slowing capital expenditure, and stalling post-pandemic recovery efforts.

Rob Brewis, director and investment manager at Aubrey Capital Management, described tariffs as “a blunt instrument that seldom works over the long term,” noting that while companies often adapt, repeated use injects volatility and hampers strategic planning. He highlighted that sectors undergoing structural change, such as automotive, are particularly sensitive to policy-induced shocks.

The sharp decline in auto stocks reflects investor concern that Trump’s Greenland-linked tariff threat is credible rather than rhetorical. European political leaders are expected to hold emergency talks to coordinate responses, including potential retaliatory tariffs or the invocation of EU countermeasures like the Anti-Coercion Instrument.

However, some diplomats and EU members caution against escalating tensions, advocating for measured responses to avoid a broader trade conflict.

The threat also comes at a time when European markets are already dealing with multiple headwinds: rising interest rates, inflation pressures, and ongoing uncertainty over global supply chains due to tensions in Asia and the Arctic. Investors are monitoring how EU policymakers, automakers, and U.S. authorities navigate the situation, given the potential for lasting impacts on production, sales, and profitability.

While tariffs are generally viewed as temporary, the combination of high stakes, political motivations, and the highly integrated nature of the European automotive industry makes this episode particularly disruptive. Analysts note that even short-term market reactions can have long-lasting effects, including delayed corporate investments, shifts in trade flows, and strategic reassessments of supply chain locations.

The situation means that at least for now, European automakers face heightened volatility, with investors closely watching emergency talks in Brussels, potential EU countermeasures, and any updates from the White House.

Gold and silver extended their record-breaking rally on Monday, underlining how deeply investors are repositioning portfolios in response to escalating geopolitical tensions, intensifying trade disputes, and growing unease over monetary policy independence in the United States.

U.S. gold futures for February delivery rose 1.71% to $4,674.20 per ounce, while spot gold climbed 1.6% to $4,668.14. Silver surged even more aggressively. U.S. silver futures for March advanced more than 5% to a record $93.02 per ounce, with spot silver trading at $93.16, up 3.55%. Both metals had already broken prior records last week, signaling strong follow-through buying rather than a one-off spike.

At the center of the latest move is a sharp rise in geopolitical risk premia. President Donald Trump’s announcement of tariffs on goods from eight European countries, tied to U.S. demands over Greenland, has revived fears of a broader trade war between Washington and its traditional allies. Investors are also weighing the prospect of tit-for-tat retaliation from Europe, a scenario that could further disrupt global supply chains and weaken already fragile growth expectations.

Market participants say gold’s appeal goes beyond headlines. Real interest rates, a key driver of bullion prices, are expected to come under renewed pressure if political developments undermine confidence in the U.S. Federal Reserve’s independence. The Justice Department’s criminal investigation into Federal Reserve Chair Jerome Powell has unsettled markets, with investors questioning whether monetary policy decisions could increasingly be influenced by political considerations rather than inflation and employment data.

Historically, periods of perceived central bank vulnerability have favored gold, which carries no yield but also no policy risk.

George Cheveley, natural resources portfolio manager at Ninety One, said gold’s rally remains rooted in fundamentals that are still firmly in place. In the firm’s 2026 sectoral outlook, he pointed to expectations of falling real rates and sustained central bank diversification away from the U.S. dollar. Central banks, particularly in emerging markets, have been steady buyers of gold in recent years as they seek to reduce exposure to dollar-denominated assets amid rising geopolitical fragmentation.

That trend, analysts say, has provided a powerful floor under prices and reduced the likelihood of sharp sell-offs.

At current levels, Ninety One estimates gold producers’ margins could be four to five times higher than in 2024, a dynamic that may attract additional investment flows into the sector and reinforce longer-term supply discipline. With new mine supply slow to respond to price signals, higher demand is feeding directly into higher prices rather than increased output.

Silver’s rally reflects a slightly different, though complementary, set of forces. Alongside its traditional role as a safe haven, silver is benefiting from strong industrial demand linked to renewable energy, electric vehicles, and electronics. Analysts note that silver’s dual identity — as both a monetary and industrial metal — can amplify price moves during periods when economic uncertainty coincides with structural demand growth.

The metal’s ability to hold near-record levels suggests the market believes industrial consumption can absorb higher prices, at least in the near term.

Broader financial markets have shown signs of strain. European and Asia-Pacific equities mostly declined on Monday, with carmakers and luxury goods companies among the worst performers as investors assessed the potential impact of new U.S. tariffs. Trump said duties would start at 10% from February 1 and rise to 25% from June 1 if no agreement is reached. The Stoxx Europe 600 Automobiles & Parts Index fell 2.2% in early trading, while the Stoxx Europe Luxury 10 index dropped 2.9%, highlighting investor sensitivity to trade exposure.

Geopolitical risks extend well beyond Europe. The U.S. capture of Venezuela’s president earlier this month and Washington’s subsequent move to take control of the country’s oil industry have raised concerns about energy market stability. Trump’s recent comments on Iran, including suggestions of an imminent military strike before appearing to step back, have added to volatility. Meanwhile, the war in Ukraine continues with no clear resolution, and expectations are growing that reconstruction and stabilization efforts in Gaza will take years rather than months.

In contrast to gold and silver, gains in other metals have been driven more by long-term structural trends than immediate geopolitics. Copper prices edged higher, with U.S. copper futures for March last up 0.54% at $5.8625 per ounce. Cheveley described copper’s risk-reward profile as attractive, supported by rising demand from power grids, renewable energy projects, and data center infrastructure tied to artificial intelligence expansion.

Overall, the surge in precious metals suggests investors are bracing for a prolonged period of uncertainty rather than a short-lived bout of volatility. With trade tensions escalating, political risk intruding into monetary policy debates, and global conflicts unresolved, gold and silver are increasingly being treated not just as hedges but as core strategic assets.