Auto stocks jumped mid day on Friday after the Financial Times reported that the EU is prepared to reduce its 10% tariff on US car imports to align more closely with the USA’s 2.5% rate in a bid to prevent a trade war with Donald Trump.

Names like Ford and GM both saw a bump during afternoon trading, and before paring gains slightly heading into the last few hours of trading for the week. 

FT cited Bernd Lange, chair of the European Parliament’s trade committee. As part of the deal, the EU would also increase purchases of American liquefied natural gas and military equipment.

The move aims to ease tensions over the EU’s trade surplus with the US, a frequent target of Trump.

During Trump’s first term, Brussels lowered tariffs on lobsters and boosted imports of US LNG and soybeans, which helped contain disputes largely to steel and aluminum.

The FT report says that while the tariff reduction would apply to all WTO members, including China, EU officials believe Chinese imports won’t spike due to existing tariffs of up to 35% on Beijing-subsidized electric vehicles.

Major automakers like BMW and Mercedes support the plan, and Germany is not expected to oppose it.

In 2022, the EU exported 738,436 vehicles to the US, importing only 271,476 vehicles in return.

Lange warned that if negotiations falter, the EU could retaliate with its new anti-coercion instrument (ACI), designed to counter economic pressure tactics. 

“Sometimes it’s important to have a gun on the table,” he is quoted as saying. 

The ACI could target US tech giants like Meta, Google, and X through measures such as suspending IP rights and imposing digital service duties. Deploying the ACI would take about six months, but Lange noted the EU’s economic clout exceeds that of previous US trade targets like Canada and Mexico, positioning it to defend its interests effectively.

The development is the latest in a decisive series of changes President Trump has implemented or affected, including further securing the border with Mexico and Canada, in less than a month of being in office.