Key Moments:
- Donald Trump announced a proposed 50% tariff on EU goods. If implemented, the duties will come into effect at the start of June.
- European markets reacted swiftly, with the STOXX 600 plunging 2.2% to 538.20.
- Germany’s DAX fell by around 2%, while French stocks plummeted by 3%. UK markets were also under pressure, as shares dropped by more than 1%.
Trump Unveils Aggressive Tariff Proposal
US President Donald Trump declared on Friday that he is recommending a flat 50% tariff on all products imported from the European Union, effective June 1st, 2025. He shared the announcement via his Truth Social platform, citing what he described as an imbalanced and unfair trade relationship between the US and the EU that he claimed resulted in a yearly trade deficit of over $250,000,000 for the US. He also remarked that discussions with the European Union were “going nowhere.”
Markets Across the Atlantic Suffer Declines
The announcement jolted equity markets, with the pan-European STOXX 600 index falling 2.2% to 538.20. German shares also suffered, with the DAX shedding almost 473 points to reach 23,526.37. In France, the CAC 40 declined by a substantial 2.97%, reflecting a loss of 233.66 basis points.
US markets echoed the sell-off sentiment. Futures contracts tied to the Dow Jones Industrial Average fell by over 600 basis points, a steep 1.46% decline to 41,312. Nasdaq 100 e-mini futures dropped by 1.76%, while S&P 500 contracts suffered a loss of 1.43%.
Rate Cut Expectations Intensify
Following Trump’s proposal, traders significantly revised their forecasts regarding the Eurozone’s monetary policy. Market participants began pricing in three interest rate cuts by the European Central Bank in the remainder of 2025, compared to two anticipated beforehand. This adjustment reflects growing concerns that higher US tariffs could slow economic growth in the eurozone, which may prompt the ECB to ease policy further.
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