The calm that had settled over global markets in recent weeks was abruptly shattered on Friday when former U.S. President Donald Trump reignited transatlantic trade tensions with a stark ultimatum: impose a sweeping 50% tariff on European Union imports unless talks yield favorable terms for the United States by June 1.
The reverberations were felt almost immediately across the Atlantic, with the Paris stock market posting its sharpest daily decline in more than a month. The CAC 40, France’s flagship stock index, plunged 1.65%—a drop of 130.04 points—closing at 7,734.40. The loss capped off a turbulent week for French equities, with the index down 1.93% for the five-day period.
Investors, already uneasy over rising interest rates and sluggish global growth, now face the added threat of renewed economic nationalism from a figure whose first term in office was marked by tariff battles and diplomatic strain.
A Familiar Trade War Playbook
Trump, who has been openly campaigning for a second term in the White House, made his latest economic broadside via Truth Social, his preferred platform for unfiltered messaging. “It is very difficult to deal with the EU, which was created to take advantage of the United States commercially,” he wrote. “Our negotiations are going nowhere. Therefore, I recommend a 50% tariff on EU products starting June 1st. There are no tariffs on products made in the U.S.”
His remarks appear to upend a tentative pause in trade escalation. Earlier in the week, the Biden administration—under pressure from Congressional Republicans and business leaders—had floated a 90-day grace period during which tariffs on EU goods above 10% would be suspended to allow for continued negotiations. That window now seems in jeopardy.
Trump’s rhetoric didn’t stop at Europe. In a separate post, he issued a stark warning to Apple, threatening the tech giant with a 25% import tariff unless it moves iPhone manufacturing to the United States. “Apple must make iPhones in America, not China,” he stated, reinforcing his broader agenda of reshoring American industry.
The Shockwaves Hit Paris
Financial analysts and economists were quick to warn of the consequences. The potential for a full-blown trade war looms large, particularly for economies like France’s, where many corporate giants rely heavily on exports—especially to the U.S.
“The markets were already walking a tightrope, and this is exactly the type of geopolitical shock that can trigger a chain reaction,” said Nicolas Sopel, a strategist at Quintet Private Bank. “A tariff hike of this magnitude would hit European exporters hard and could provoke retaliatory measures from the EU, setting off a vicious cycle.”
Luxury and Auto Sectors Bear the Brunt
Some of France’s most iconic industries were immediately punished. The luxury goods sector, often seen as a bellwether for trade stability, suffered notable losses. Shares in Hermès dropped by 2.63% to €2,373.00, while Kering, the parent company of Gucci and Balenciaga, fell 1.26% to €173.30. LVMH, the world’s largest luxury conglomerate, also shed 1.26% to end the day at €479.00.
“Luxury goods are extremely sensitive to consumer confidence and international trade dynamics,” said Marie Lemoine, a Paris-based retail analyst. “When tariffs are threatened, it’s not just the cost that rises—it’s the uncertainty. And markets hate uncertainty.”
The automotive sector also found itself squarely in the crosshairs. Stellantis, the multinational auto group formed from the merger of Peugeot and Fiat Chrysler, saw its shares plummet 4.56% to €8.75. The company, heavily exposed to the U.S. market, has now lost more than 30% of its value since January.
Automotive suppliers followed suit. Forvia (formerly Faurecia) declined 2.27% to €7.84, while Valeo slid 2.81% to €8.99, reflecting broader anxiety about how supply chains could be disrupted by increased costs and regulatory complexity.
Fiscal Policy Concerns Compound Fears
The market jitters are not just about tariffs. On Thursday, the U.S. House of Representatives passed a major budget proposal championed by Trump that would extend and expand tax credits initiated during his first term. While popular among some voters and businesses, economists warn that the move could inflate the federal deficit to unprecedented levels.
“Extending Trump-era tax credits might boost short-term consumer spending, but it raises long-term fiscal alarm bells,” said Sopel. “The deficit could balloon from $2 trillion to $4 trillion over the next decade. That’s not sustainable.”
The convergence of protectionist trade policies and expansionary fiscal measures paints a worrying picture for global economic stability. The U.S. already runs a significant trade deficit, and tariffs are unlikely to reverse that trend in a meaningful or sustainable way, experts say.
“To actually rebalance trade, America would need to rebuild domestic manufacturing capacity—a long and costly process that can’t be accomplished by decree or tariffs alone,” Sopel added.
Traders Brace for a Volatile Weekend
As the week drew to a close, market participants prepared for what could be a volatile weekend, anticipating more provocative statements from Trump and possible retaliatory rhetoric from EU leaders. European Commission officials have so far been measured in their responses, but Brussels is unlikely to sit idle if tariffs are indeed imposed.
Independent analyst Andreas Lipkow echoed the apprehension in a note to clients: “Market sentiment is fragile. If the weekend brings further escalation, we could be looking at a very difficult open on Monday.”
Many investors were already reducing risk exposure ahead of the close, selling off holdings in vulnerable sectors and rotating into safer assets. The euro, meanwhile, weakened slightly against the dollar, reflecting investor flight to perceived safety.
A Glimmer of Optimism: VusionGroup Defies the Trend
Not every stock was caught in the crossfire. VusionGroup, a tech firm specializing in smart retail solutions, bucked the downward trend in spectacular fashion. Its shares surged by 9.32% to €217.00, leading the SBF 120 index. The jump followed the company’s announcement of a new partnership with British supermarket chain Co-op, which plans to roll out VusionGroup’s digital price tags across 2,400 locations.
“Strategic innovation is the lifeline in this kind of market,” said tech analyst Léa Bonnet. “VusionGroup’s expansion into the UK retail space signals not just growth potential, but resilience in the face of broader economic headwinds.”
The Road Ahead
Whether Trump’s threats materialize into formal policy remains to be seen, but the market response underscores the fragility of investor confidence in a world where politics and economics are more entwined than ever.
For European companies, especially those heavily reliant on transatlantic trade, the next few weeks could be crucial. They will need to brace for potential disruptions while hoping that cooler heads in Washington and Brussels can de-escalate tensions.
Until then, the markets remain in a state of anxious anticipation. As one Paris-based trader put it: “It’s not earnings reports or macro data we’re watching now—it’s social media. And that’s a deeply unsettling reality for global finance.”