European stock markets tumbled on Thursday in the wake of the US President Donald Trump’s warnings against potential 25% tariffs on imports from the European Union. As the FURORE of a trade war has been creating a lot of unease on the financial markets, many stock exchanges in Europe registered massive losses, the most significant of these, however, was in Germany.
The DAX index from Germany was the most affected one, as automotive stocks plundered the outcome. FTSE 100 in London and France’s CAC 40 have also seen considerable falls as traders have made up their minds to assess their positions under the potential economic impacts of new trade barriers.
The President’s comments were made at his first Cabinet meeting, when he openly announced that the tariffs on goods from Canada and Mexico would be put into effect on April 2. He then moved on to the European Union, declaring that his trade deals included a 25% tariff on European products.
Trump blamed the EU for the exploitation of the United States and claimed that they do not let American cars or agricultural products into the US, having almost everything from the US meanwhile. The Head of State’s statements expressed concerns and fears about the relations of global free trade and the possible consequences related to economic growth.
As a response to Trump’s threats, the European Union bonced back, calling him a “liar” and promising to strike back proportionately to any imposed tariffs. As a result, if the US really goes along with the initiative of imposing new tariffs, the EU might be forced to do the same to provide some reciprocity and maintain that common ground of trade between the two.
This event would cause widespread damage to businesses and customers both in the US and the EU. It would disrupt the supply chain, which could lead to higher prices for a variety of goods.
News on the automotive industry led to the drop of shares of leading European car companies. Volkswagen, BMW, and Daimler’s stock prices declined as investors tried to predict the effects of the US tariffs on their revenue. Car companies are facing the difficulty of the US trade barrier, in addition, they are confronted by not only the issues of electric cars but also the changes of consumer preferences.
Furthermore, with the immediate market result, economists and analysts forecast the wider economic consequences of the rising trade conflicts. This could cause higher tariffs to be raised and the cost of the good on the market to other producers to hike up, due to which economic growth and job creation could be slowed down.
There are also concerns about the impact on global supply chains, which have become increasingly interconnected in recent decades. The breaking of the networks would render not only the targeted industries but also many other sectors inefficient and result in a crisis in the world economy.
While the markets are processing the information and waiting for the developments, the focus is now on how other international actors might respond to the changing trade landscape. China, which has been involved in its own trade disputes with the United States is looked upon for indicators of its stance regarding potential US-EU trade tensions. The situation remains unstable, therefore investors and policymakers are preparing for the possible ups and downs in the field of trade caused by the rapid changes and lack of solution to the problems.
