US President Donald Trump has imposed new tariffs on major trading partners, sending shockwaves through global markets. The move has raised fears of an economic slowdown as investors brace for the impact of higher costs and trade restrictions.

Trump announced that the US will now match half the duties foreign countries impose on American goods. The new tariffs target value-added taxes (VATs), import bans, subsidies, and currency policies that Trump argues put American businesses at a disadvantage.

The US has raised tariffs on several key trade partners:

• China: 34%
• Japan: 24%
• European Union: 20%

However, Canada and Mexico were spared from penalties under the United States-Mexico-Canada Agreement (USMCA). Investors had expected less aggressive measures, and the sudden tariff hike has increased concerns about a global trade war.

European Carmakers Face Higher Costs

One of the hardest-hit industries is the European auto sector. Trump’s tariffs add pressure to carmakers that already face a 25% duty on exports to the US. The new tariffs will make European cars more expensive in the American market, hurting sales and competitiveness.

As a result, investors pulled out of auto stocks, fearing long-term damage to European manufacturers. The uncertainty has caused financial markets to tumble worldwide.

Global Stock Markets Plunge

Stock markets suffered sharp declines following the tariff announcement. The S&P 500 futures dropped more than 3%, marking the biggest single-day fall in nearly three years.

In Europe, the Euro STOXX 50 index fell 2.2%, led by declines in companies dependent on exports. German sportswear giants Adidas and Puma sank nearly 10% as investors feared US rivals could gain an advantage.

In France, EssilorLuxottica, a major eyewear company, saw shares drop over 4%. The CAC 40 index fell 1.8%, weighed down by losses in banks and luxury brands. Financial firms Société Générale, BNP Paribas, and Crédit Agricole declined by more than 3%. High-end fashion brands Kering, LVMH, and Hermès also took heavy losses.

Italy’s FTSE MIB index dropped 1.8%, with banks like BPER Banca, UniCredit, and Banco BPM suffering major hits.

Germany’s DAX index fell 1.4%. Commerzbank lost 6.5%, while Deutsche Bank declined by 3.6%. Tech giant SAP dropped 2.5%, dragging the index lower.

Spain’s IBEX 35 fell 1.5% as its biggest banks saw declines of over 3%.

Local-Focused European Stocks Rise

Not all European stocks fell. Investors shifted toward companies with less exposure to international trade. Consumer goods firms Danone and Carrefour saw modest gains of 1% to 2%.

Utility companies also benefited. E.ON, Iberdrola, Enel, ENGIE, and A2A all recorded small increases as investors sought stability.

Telecommunications firms, including Telefonica, Orange, Deutsche Telekom, Vodafone, and Swisscom, posted slight gains as well. Many analysts expect the European Union to retaliate with tariffs on US goods, which could benefit domestically focused companies.

US Dollar Weakens, Euro and Pound Strengthen

The US dollar fell sharply as investors sold US assets amid fears of a broader economic slowdown.

• The euro climbed 1.2% to $1.0990, its highest level since October 2024.
• The British pound gained 1% to $1.3122.
• The Swiss franc strengthened 1.5% against the dollar as investors sought safe-haven assets.

Bonds and Gold Surge as Investors Seek Safety

With uncertainty rising, investors moved into safer assets such as government bonds and gold.

• Germany’s 10-year Bund yield fell 6 basis points to 2.65%.
• Spanish and Italian 10-year bond yields dropped 5 basis points.
• Gold surged to a record $3,167 (€2,911) per ounce before retreating slightly by 0.5%.

Energy Prices Drop on Demand Concerns

Oil prices slumped as markets feared lower global demand due to rising tariffs and economic slowdown.

• West Texas Intermediate (WTI) crude oil fell 3.5%, dropping below $70 (€64) per barrel.
• Brent crude declined 3% to $72 (€65).
• Dutch TTF natural gas prices slipped 2% to €40.2 per megawatt hour.

Bitcoin Holds Steady Despite Market Chaos

Unlike traditional markets, Bitcoin remained resilient. The cryptocurrency rose 1% to $83,368 (€76,030). While most investors moved to safer assets, Bitcoin showed strength as an alternative investment.

Future Trade Tensions Loom

Market analysts warn that if trade tensions escalate, the global economy could slow down further. Some fear that businesses will reduce investments and cut jobs if tariffs remain in place for a long time.

While Trump has defended the tariffs as necessary to protect American industry, critics argue that they could backfire by raising consumer prices and hurting economic growth.

As global markets react, investors will closely watch for potential countermeasures from affected countries. If the European Union, China, or Japan impose retaliatory tariffs, the economic impact could grow even worse.