Germany’s benchmark stock index, the DAX, has skyrocketed to record highs. It’s up 13% year-to-date – by far the best performing major index in the world. Recent actions and statements from the White House continue to stoke that trend. Consequently, the DAX has surged 21% from its low hit on April 7th. As of Tuesday, the broad market index is only 4% off of its all-time high hit in March. Congratulations – that’s six days in a row of record highs!!!
The DAX rally is more symptomatic of what’s going on in the broader market. A lot of global investors are still reacting to U.S. President Donald Trump’s recent orders to reduce tariffs on the automotive industry. More specifically, Trump signed two executive orders that give extensive relief to automakers by shielding them from having to deal with warring duties. This decision supercharges Germany’s influence on our own auto sector. It remains the top European car exporter to the U.S. with $24.8 billion worth of vehicles exported in 2024.
A little over three weeks ago, Trump talked about a 90-day freeze on reciprocal tariffs. Since that time, German auto stocks have enjoyed record highs. The reduction of tariff burdens will strengthen automotive business in Germany. This sector has been hit particularly hard with rising production costs. Economists and analysts have previously warned that tariffs could significantly increase manufacturing expenses and raise vehicle prices by thousands of dollars.
The first executive order prevents automakers from being subjected to conflicting requirements. Further, Trump changed course on the upcoming 25% tariff on auto parts scheduled to take effect on May 3. New guidance, released on March 31st, lets automakers take an offset equal to 3.75% of the vehicle’s retail price for vehicles assembled in the U.S. This benefit first became available and remains at least through April 30, 2026. This benefit will be reduced back down to 2.5% the following year.
“The rate of duty resulting from such stacking exceeds what is necessary to achieve the intended policy goals.” – Donald Trump
Even as the DAX breaks records, other major indices tell a very different story. The S&P 500 is down 5.5% on the year, making this divergence between Europe and the U.S. even more pronounced. Some analysts believe that this hope of future tariff reductions is one of the many factors leading to accelerating inflows into European assets.
Kyle Rodda, a senior market analyst at Capital.com, noted that “European assets are certainly gaining traction for several reasons: there’s definitely the end of US exceptionalism, there’s hope the tariffs will come down on Europe, and the fiscal impulse in Europe as it remilitarizes will be historically strong.”
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