The sea of red across key European indexes on Wednesday morning comes as US President Donald Trump’s new tariffs came into effect, including total import levies of 104% on Chinese goods. US Customs and Border Protection confirmed that it was preparing to collect country-specific tariffs from 86 nations.
While the president indicated he remained open to negotiations, he also confirmed that the planned tariffs on Chinese imports would proceed. He signed an executive order tripling tariffs on low-value Chinese goods to 90%, effective from 2 May.
Trump stated that he was making “tailored deals” with certain nations, as some Asian countries and the European Union were open to discussions. However, there has been no further response from China since it vowed on Tuesday to “fight to the end”. “China also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call. It will happen!” Trump said at the White House on Tuesday.
European markets lower
As of 11:00 CET, the Euro STOXX 50 was down 2.54%, the broader STOXX 600 fell 2.96%, while France’s CAC 40 declined 2.53%.
Germany’s DAX dropped 2.99%, and London’s FTSE 100 declined 2.55%. In Italy, the FTSE MIB dropped 2.63% and Spain’s IBEX 35 lost 2.34%.
European car companies were also in negative territory with Volkswagen AG shares falling 1.06%, Mercedes-Benz Group AG down 1.31%, and Ferrari N.V. losing 1.06%.
Asian markets deepen losses
Equity markets across Asia also resumed their declines, with Hong Kong’s Hang Seng Index falling nearly 2%, Japan’s Nikkei 225 slumping 4%, Australia’s ASX 200 losing 1.8%, and South Korea’s Kospi down 1.7% by 5:50 a.m. Central European Time.
In China, the People’s Bank of China (PBOC) weakened the Yuan fixing against the US dollar for a fifth consecutive session. The USD/CNY pair rose to 7.35, a level not seen since September 2023. However, analysts expect the central bank to weaken the Yuan gradually to avoid disorderly movements that could trigger capital outflows.
South Korea unveiled a US$2 billion emergency package to support its carmakers, warning that Trump’s 25% tariffs on automobiles would deliver “a significant blow” to the critical sector.
India’s Nifty 50 was more resilient, down only 0.55%, after the Reserve Bank of India (RBI) cut its benchmark rate for the second time in a row to 6% and shifted its policy stance to accommodative.
New Zealand’s stock market also outperformed the broader region, down just 0.6%. The Reserve Bank of New Zealand (RBNZ) lowered its official cash rate for the fifth consecutive meeting to 3.5%, signalling further rate cuts ahead as it confronts downside risks to growth and inflation stemming from the US tariffs.
US stocks futures also decline
US stock futures also fell sharply, with the S&P 500 down 2.56%, the Nasdaq sliding 2.76%, and the Dow Jones Industrial Average declining 2.18% as of 5:18 a.m. CET. The rally on Wall Street earlier this week was short-lived, as uncertainty deepened after Trump confirmed that he would proceed with tariffs on China.
“Fundamentally, it will be tough to turn bullish unless and until the Trump administration begins to either make policy in a coherent manner, strike a less hawkish tone on tariffs, or begin rolling back ‘reciprocal’ duties via country-specific deals,” Michael Brown, senior research strategist at Pepperstone London, wrote in a note.
Haven assets shine
Risk-off sentiment drove gains in traditional haven assets, including gold, the Japanese yen, the euro, and the Swiss franc. Spot gold rose more than 1% to reach a daily high of $3,018 per ounce. The euro climbed 0.7% against the US dollar to 1.1037 as of 5:30 a.m. CET, nearing a seven-month high, while the dollar weakened 0.65% against both the Japanese yen and the Swiss franc—falling to levels last seen in October 2024.
However, US Treasuries saw heavy selling, particularly in longer-dated government bonds, suggesting that traders are becoming increasingly sceptical about the economic outlook in the US. The 30-year US Treasury yields soared 20 basis points to a year-high level on Tuesday.
ADVERTISEMENTOil extends losses
Crude oil prices continued to fall, with Brent futures down 3.84% to $60.41 per barrel and West Texas Intermediate (WTI) futures tumbling 4.23% to $57.06 per barrel as of 5:30 a.m. CET. Both benchmarks are now at their lowest levels since March 2021.
