Published by Global Banking & Finance Review®
Posted on February 3, 2025
3 min readLast updated: January 26, 2026
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European shares fall as Trump's tariffs spark fears of a trade war, impacting global markets and industries like automakers and technology.
By Nikhil Sharma
(Reuters) -European shares retreated on Monday, joining a global selloff, amid fears that U.S. President Donald Trump's latest tariffs could escalate into a broader trade war.
Global financial markets came under pressure after Trump issued 25% trade duties on Canada and Mexico, along with a 10% levy on China over the weekend.
The tariffs, set to take effect at 0501 GMT on Tuesday, will affect $1.3 trillion of goods, or more than 40% of all U.S. imports.
Canada and Mexico announced immediate retaliatory levies, while China also announced countermeasures.
Trump also warned that tariffs on Europe will "definitely happen", but did not offer any clarity.
"Negotiating tactics from the EU as well will be key. We're in a very fluid situation here and this is exactly the kind of moment markets will struggle to price in an exact outcome," said Chris Beauchamp, chief market analyst at IG Group.
The pan-European STOXX 600 index was down 1.4% as of 0930 GMT, receding from Friday's record close, while futures for Wall Street's S&P 500 slid 1.5%.
The index of automakers, which is vulnerable to trade duties, sank 3.5%. Porsche AG, BMW, Volkswagen, Mercedes-Benz and Stellantis fell in the range of 3.4% to 6.7%.
Technology also was among the major losers, falling 2.3%, with ASML Holding's 3.1% decline weighing heavily.
China-exposed luxury goods makers also fell following the tariff announcement, with LVMH and Kering down 2.5% and 4%, respectively.
"The risk is that this situation escalates in so many ways and that you really have a long-standing trade war that will drive down profits, will hit margins and potentially be inflationary," Beauchamp added.
Basic Resources fell 2.2% as most metal prices slipped following Trump's 10% tariff on imports from top metals consumer China. [MET/L]
All local bourses fell significantly, with the UK's benchmark FTSE 100 sliding 1.4%, despite Trump's statement on Sunday suggesting Britain may be able to avoid tariffs.
Euro zone bond yields fell, with Germany's rate-sensitive two-year yield down 7 basis points at 2.042%.
On the economic front, the decline in Germany's manufacturing sector eased in January, helped by the slowest fall in both output and new orders in months.
The euro zone's factory activity showed signs of stabilisation in January as firms brushed off rising costs and the threat of U.S. tariffs to become more upbeat about the outlook.
Among other stocks, shares of Julius Baer dropped 10.8% after the Swiss bank announced plans to cut its workforce by about 5% as part of savings measures under the new chief executive Stefan Bollinger.
LightOn slipped 8.4% after the French generative AI startup, in its first results since its November IPO, missed the 2024 revenue target due to a delayed signing of some contracts.
(Reporting by Nikhil Sharma; Editing by Varun H K and Vijay Kishore)
European shares retreated due to fears that U.S. President Trump's latest tariffs could escalate into a broader trade war.
Trump issued 25% trade duties on Canada and Mexico, along with a 10% levy on China, affecting $1.3 trillion of goods.
The pan-European STOXX 600 index was down 1.4%, with significant declines in the automakers and technology sectors.
Analysts warn that escalating tariffs could lead to a long-standing trade war, driving down profits and hitting margins.
Shares of automakers like Porsche, BMW, and Volkswagen fell significantly, while luxury goods makers like LVMH and Kering also saw declines.
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