The European Union (EU) has threatened the United States of a tit-for-tat situation should Trump impose a 25% tax on foreign steel. This is especially true as the EU would propose a retaliatory tariff of 25% on a range of consumer, agricultural and steel products imported from the country, valued about 2.8 billion euros ($3.5 billion).

The targeted products include shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around 1 billion euros; orange juice, bourbon whiskey, corn and other agricultural products totaling 951 million euros; and steel and other industrial products valued at 854 million euros.

In a counter-attack, Trump warned the EU that he would impose a 25% penalty on European car imports if the bloc carried out punitive measures against the metals tariffs. He reiterated his commitment to levying tariffs on steel and aluminum, saying that the United States has poor trading conditions with other nations, including those in the EU. According to the latest data from the European Automobile Manufacturers' Association (ACEA), EU and U.S. auto-related trade account for around 10% of total trade between the two regions.

Intensifying talks of a trade war between Trump and the EU have been unnerving investors lately, putting many stocks and ETFs in focus. Here, we have discussed some.

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The penalty on European car imports could spell trouble for popular car manufacturers like Volkswagen and BMW, affecting the German auto industry. These luxury carmakers also manufacture cars in America, shipping billions of dollars abroad. According to Germany's Association of the Automotive Industry, this country produced 854,000 vehicles in the United States in 2016, marking a four-fold increase in about seven years. More than 60% of those were exported.

As such, iShares MSCI Germany ETF (EWG - Free Report) targeting the German stock market, will likely feel the pressure. The ETF has a Zacks Rank #2 (Buy) with a Medium risk outlook.

Coming to the EU proposed retaliation against U.S. goods, manufacturer and seller of motorcycles Harley Davidson (HOG - Free Report) will be hit hard as about 16% of the company’s sales come from Europe. The company cautioned that the tariffs “will drive up costs for all products with these raw materials, regardless of their origin.” It also stated “a punitive, retaliatory tariff on Harley-Davidson motorcycles in any market would have a significant impact on their sales, their dealers, suppliers and the customers in those markets.” The stock has a Zacks Rank #3 (Hold) and a VGM Score of D.

Harley Davidson accounts for a minor 1.5% share in the only pure play auto ETF — First Trust NASDAQ Global Auto ETF (CARZ - Free Report).

Other iconic American brands that will be hurt include Levi Strauss & Co, the corporate parent of global market-share leader Levi's, and bourbon whiskey. Notably, Europe has been a major contributor to Levi’s sales, with 20% increase in jeans sales last year.

Meanwhile, the additional tax on bourbon whiskey will make the product more expensive, hurting sales of the likes of Brown Forman Corporation’s Jack Daniel's family of whiskey, Diageo’s (DEO - Free Report) Bulleit Bourbon Whiskey and Constellation Brands’s (STZ - Free Report) Black Velvet. The three stocks have a Zacks Rank #3.

This would negatively impact the performance of the Spirited Funds/ETFMG Whiskey and Spirits ETF (WSKY - Free Report) targeting the fast-growing world of high-end whiskey and spirits. In fact, it has heavy exposure to Diageo, which dominates the fund’s return with 16.6% of total assets.