Tariffs between the U.S. and EU are negotiated, leading to a slight increase in Dax stocks
The recently announced trade deal between the USA and Japan has sparked a positive reaction from Europe's stock exchanges, but its implications for German companies and the DAX stock exchange are more complex.
The agreement, which includes commitments from the EU to invest heavily in the US and purchase American energy exports, offers temporary tariff relief to German automakers, reducing the tariff on EU vehicles from 27.5% to 15%. This move provides short-term relief, easing immediate export pressures for German carmakers. However, concerns persist about structural risks facing German industry, including supply chain vulnerabilities, lagging transition to electric vehicles, and enduring US protectionism.
Many export sectors, including chemicals, pharmaceuticals, mechanical engineering, and metals, experience pressure from remaining tariffs and supply chain uncertainties. The deal, while averting a full trade war, imposes a 15% tariff that still hinders growth and adds costs to German exports. Economic sentiment in Germany has weakened sharply as a result, with key industry outlooks downgraded.
The uncertainty and mixed signals from the trade deal create volatility and dampened investor confidence in German equities, especially for export-heavy sectors represented on the DAX index such as automotive and industrials. The short-term relief on tariffs comes with long-term concerns about competitiveness in a changing global trade environment, which has contributed to a slump in economic sentiment and subdued market optimism in August 2025.
The oil price, which started to rise at the beginning of the week, also rose on the same day as the announcement of the trade deal between the USA and Japan. A barrel of the North Sea Brent blend cost $68.90 at 9 am German time, an increase of 46 cents or 0.7 percent compared to the close of the previous trading day.
On Monday morning, the European common currency (Euro) was weaker against the US dollar. One euro cost 1.1718 US dollars, and one dollar was equivalent to 0.8534 euros.
In summary, the US-EU trade deal offers German companies temporary tariff relief but highlights enduring strategic challenges, particularly in the automotive sector. The overall economic impact is weighed down by tariff persistence, policy uncertainties, and competitiveness issues, which have softened investor sentiment on the DAX and threaten medium- to long-term German industrial growth.
The US-Japan trade deal's temporary tariff relief for German automakers has eased immediate export pressures, yet it highlights persistent challenges in the industry, specifically in the automotive sector. Consequently, this situation has caused a softening of investor sentiment on the DAX and threatens medium- to long-term German industrial growth, while the finance sector grapples with tariff persistence, policy uncertainties, and competitiveness issues.
