Caterpillar shares dipped Friday after Bloomberg reported the European Union is preparing to target the U.S. heavy machines builder with tariffs.

The stock later recovered most of the losses, ending the day down just 0.1 percent.

The EU's move would be in implemented if President Donald Trump goes through with his plan to put tariffs on European automakers. Trump is threatening tariffs of up to 25 percent on imported European autos and auto parts. He would implement the tariffs by designating the imports a national security threat, according to a confidential U.S. Commerce Department report.

"Caterpillar competes best in a free trade environment," the company said in a statement to CNBC. "This situation continues to be very fluid and we are actively engaged in the discussions. We are hopeful that the government leaders can work toward a positive outcome for all parties."

Beyond Caterpillar, the EU also has said it would not feel obliged to stick to its promise to buy more soybeans and liquefied gas from the United States.

Trump has long focused on crushing overseas automakers with heavy tariffs, reportedly seeing the threat of further car duties as his best trade negotiating tactic.

The report also mentioned Xerox as another U.S. company the EU would target in response to auto tariffs. Xerox shares initially fell 1.9 percent in the premarket but finished the day up 0.5 percent.

– Reuters contributed to this report.