Investing.com - European stock markets fell Thursday, as investors digested the announcement of U.S. tariffs on all foreign-made automobiles, a few days before U.S. President Donald Trump is expected on announce wide-ranging levies that could disrupt global trade

At 04:05 ET (08:05 GMT), the DAX index in Germany dropped 1.5%, the CAC 40 in France slipped 1% and the FTSE 100 in the UK fell 0.5%.

Auto tariffs weigh heavily

President Trump on Wednesday announced the imposition of a 25% tariff on all imported automobiles and auto parts not produced within the U.S., effective April 2.

This measure aims to encourage automakers to shift production to domestic facilities and reduce trade deficits.

Europe’s carmakers exported around 800,000 vehicles to the United States last year, according to official U.S. trade data, about four times the number of cars exported by the U.S. to Europe.

The region’s top carmaker, Volkswagen (ETR: VOWG_p ), is particularly exposed, with 43% of its U.S. sales sourced from Mexico, according S&P Global Mobility, but fellow.automakers Mercedes Benz (ETR: MBGn ), BMW (ETR: BMWG ), Stellantis (NYSE: STLA ) and Porsche Automobil Holding SE (ETR: PSHG_p ) are also under heavy pressure.

The European Commission said it would assess these tariffs and continue to seek negotiated solutions, but the specter of a wide-ranging trade war looms large.

April 2 has been dubbed “liberation day” by Trump, with the president expected to unveil a wide range of so-called reciprocal tariffs: levies on imported goods that he argues are unfairly taxed by the U.S.’s trading partners.

H&M suffers slow start

The economic data sale is largely empty in Europe Thursday, but these are more important corporate earnings for investors to study.

H&M (ST: HMb ) reported weaker than expected sales for its first quarter, with the Swedish fast-fashion retailer signaling a slow start to its spring and summer season.

On a more positive note, Next ’s (LON: NXT ) annual profits broke £1 billion for the first time after a 10% increase in the financial year to January, prompting the U.K. fashion retailer to lift its profit guidance for the current year.

Crude prices retreat

Oil prices slipped back from a one-month high Thursday, after government data confirmed a hefty drop in U.S. crude inventories, signalling healthy demand for fuel in the world’s largest economy.

At 04:05 ET, Brent crude futures fell 0.3% to $72.83 a barrel, and U.S. West Texas Intermediate crude dropped 0.3% to $69.43 a barrel.

Both benchmarks rose by around 1% Wednesday on government data showing U.S. crude oil inventories fell last week, dropping by 3.3 million barrels, exceeding analysts’ expectations of a 956,000-barrel reduction.

Sentiment has been hit, however, by the announcement of Trump’s auto tariffs, as traders weighed the impact on global economic activity.