The shadow of trade war politics returned to haunt European markets on Friday as former U.S. President Donald Trump once again brandished tariffs as a negotiating weapon, sending stock markets across the continent tumbling into the red.
In an afternoon post on Truth Social, Trump called for sweeping import duties—proposing a staggering 50% tariff on goods from the European Union starting June 1st, and a 25% tariff on Apple if the tech giant continues manufacturing its iPhones outside the United States.
The announcement reignited deep-seated investor fears that a second Trump presidency could reintroduce the economic volatility of his first term, characterized by hardline trade battles and erratic policy shifts. The reaction in Europe was swift and severe.
Markets React Swiftly to Tariff Shock
In Paris, the CAC 40 closed down 1.65% at 7,734.40 points. Frankfurt’s DAX dropped 1.61%, while London’s FTSE 100 posted a more modest decline of 0.24%. Broader European indices also reflected the unease: the EuroStoxx 50 shed 1.89%, the FTSEurofirst 300 fell 0.96%, and the pan-European Stoxx 600 lost 1.03%.
The weekly tallies were similarly gloomy, with the CAC 40 down 1.93% over five sessions and the Stoxx 600 off by 0.84%.
Markets had been enjoying relative calm before Trump’s explosive statement disrupted the mood. Investors, already uneasy over global growth concerns and monetary policy shifts, fled risky assets and sought safety amid mounting uncertainty over how far Trump’s latest threats might go.
“It’s like déjà vu from 2018,” remarked Claire Moreau, an equity strategist based in Paris. “Trump’s strategy is to shock, and the market is clearly spooked by the prospect of renewed trade hostilities between the U.S. and Europe.”
A Pattern of Escalation
Trump’s latest social media salvo accused the EU of exploiting the U.S. economically, warning that the ongoing talks with Brussels had been “very difficult.” He framed the proposed 50% tariff as a necessary corrective and an ultimatum to bring the bloc to heel.
Earlier this year, Trump had suspended previously announced tariff hikes to allow time for negotiations, but Friday’s message appeared to signal a breakdown in dialogue—or at least a calculated provocation.
Citigroup economist Obert Sockin viewed the move as a pressure tactic. “I believe this 50% tariff threat is just that—a negotiating ploy,” he said. “If such tariffs were implemented, it would almost certainly push Europe into a recession. But I remain skeptical they’ll actually be enforced.”
Adding fuel to the fire, Trump also took direct aim at Apple, suggesting that the company should face a 25% tariff on any iPhones not assembled within the U.S. “Apple should be producing in America, not China,” he declared.
But analysts were quick to dismiss the feasibility of this suggestion. “The idea of Apple shifting iPhone production to the U.S. is a fantasy,” said Daniel Ives of Wedbush Securities. “The logistical and cost implications would result in massive price hikes.”
European Industries Take a Hit
The luxury sector, which relies heavily on affluent American consumers, bore the brunt of Friday’s market fallout. Paris-based EssilorLuxottica plunged 4.8%, Hermès dropped 2.6%, LVMH fell 1.2%, and Kering also lost 1.2%. British luxury brand Burberry slid 1.5%. The broader European luxury goods index fell by 2.7%.
“The luxury sector is highly sensitive to trade and travel sentiment,” explained retail analyst Camille Bernard. “Any friction between the U.S. and EU directly affects sales, especially for high-end fashion and accessories.”
The financial sector also felt the sting, as the banking component of the Stoxx index lost 1.9%. French banking majors were hit hard—Société Générale fell 2.6%, BNP Paribas lost 2.1%, and Crédit Agricole declined 1.9%.
Meanwhile, the automotive sector, another transatlantic trade heavyweight, initially plunged more than 5% during the session before slightly recovering by the close. Ferrari ended down 3.5%, Stellantis dropped 4.6%, Renault lost 1.2%, BMW retreated 3.7%, and Volkswagen dipped 2.5%.
French spirits producers were also dragged into the crossfire. Rémy Cointreau dropped 4.06%, and Pernod Ricard slid 3.10%. Industry insiders warned that French cognac exports to the U.S. could grind to a halt if Trump’s proposed 50% tariffs are enacted.
“A tariff like that would make it practically impossible to sell high-end spirits in the U.S.,” said one senior executive within the sector who asked not to be named.
Wall Street Mirrors the Gloom
As trading in Europe came to a close, U.S. stocks were also under pressure. The Dow Jones Industrial Average was down 0.56%, the S&P 500 slipped 0.69%, and the tech-heavy Nasdaq dropped 0.96%.
Apple, the direct target of Trump’s tariff talk, fell 2.3%, erasing billions in market value amid investor concern about future production costs and supply chain disruption.
Economic Bright Spot Overshadowed
Before Trump’s tariff threats stole the headlines, there had been a glimmer of positive economic news. Germany’s economy grew more than previously reported in the first quarter, with GDP expanding 0.4%, double the initial estimate of 0.2%.
This revision briefly buoyed sentiment in the morning session, but it was quickly overshadowed by escalating trade worries.
Currency and Bond Markets Reflect Jitters
The U.S. dollar weakened in the wake of Trump’s announcements, losing 0.71% against a basket of major currencies. The euro, meanwhile, rose 0.59% to $1.1347, as investors speculated that European assets might offer relative shelter.
American bond markets also reacted with caution. The yield on 10-year Treasury notes dropped 4.4 basis points to 4.509%, while the 2-year yield fell 2.3 basis points to 3.9763%. Declining yields suggest investors are bracing for a potential slowdown in economic growth.
In Europe, German bond yields fell sharply amid growing expectations that the European Central Bank (ECB) may consider rate cuts to counter the economic fallout of renewed trade tensions. The benchmark 10-year Bund yield declined by 6.6 basis points to 2.573%, while the 2-year yield slid 6 basis points to 1.763%.
Oil Prices Edge Higher, But Weekly Losses Persist
Crude oil prices inched up slightly on Friday but were still headed for weekly losses. Market sentiment was dampened by concerns that OPEC+ might increase output in July, further complicating the supply-demand balance.
Brent crude rose 0.61% to $64.85 per barrel, while U.S. West Texas Intermediate (WTI) advanced 0.78% to $61.66.
What Comes Next?
As the week ends, markets are bracing for more volatility. Trump’s comments have created fresh uncertainty at a time when investors are already contending with inflation, central bank policies, and slowing global demand.
With just days left until Trump’s self-imposed June 1 deadline, all eyes will be on Washington and Brussels. Whether cooler heads prevail or the tariff threats materialize, the stakes for both economies—and markets—could not be higher.