European equities slide as tariff escalation fuels growth concerns
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European equity markets declined sharply on Thursday, reaching two-month lows amid escalating trade tensions triggered by U.S. President Donald Trump’s imposition of sweeping new tariffs. The pan-European STOXX 600 index dropped 1.7% in early trading, while Germany’s DAX fell 2.4%, reflecting its higher exposure to global trade. The selloff extended across global risk assets, with S&P 500 futures falling 3.1% as investors sought refuge in bonds and safe-haven commodities such as gold.
The newly introduced 10% blanket tariff on goods imported into the U.S. raises the effective levy on European Union exports to 20% and on Chinese goods to 54%, prompting immediate warnings of retaliatory action. The move marks a significant escalation in protectionist policy, amplifying investor fears of supply chain disruption, margin pressure, and weakening global demand.
Financial stocks led the declines across the eurozone, with the banking sector index down 3.1%. The downturn reflects heightened sensitivity to growth forecasts and expectations that the EuropeanCentral Bank may accelerate monetary easing to mitigate downside risks. Forward interest rate markets have already begun to price in additional rate cuts.
Country-specific pressure was particularly evident in Italy and Spain, where the FTSE MIB and IBEX 35 lost 1.7% and 1.4%, respectively. Both indices are heavily weighted in financials, which remain the most exposed segment in the current macro environment.
Conversely, defensive sectors showed relative resilience. Utilities, healthcare, real estate, and consumer staples posted modest gains, underscoring a rotation into lower-volatility assets amid elevated uncertainty. With the full economic impact of the new tariff regime still unfolding, European equities are likely to remain reactive to geopolitical developments and central bank signals in the near term.
The newly introduced 10% blanket tariff on goods imported into the U.S. raises the effective levy on European Union exports to 20% and on Chinese goods to 54%, prompting immediate warnings of retaliatory action. The move marks a significant escalation in protectionist policy, amplifying investor fears of supply chain disruption, margin pressure, and weakening global demand.
Financial stocks led the declines across the eurozone, with the banking sector index down 3.1%. The downturn reflects heightened sensitivity to growth forecasts and expectations that the EuropeanCentral Bank may accelerate monetary easing to mitigate downside risks. Forward interest rate markets have already begun to price in additional rate cuts.
Country-specific pressure was particularly evident in Italy and Spain, where the FTSE MIB and IBEX 35 lost 1.7% and 1.4%, respectively. Both indices are heavily weighted in financials, which remain the most exposed segment in the current macro environment.
Conversely, defensive sectors showed relative resilience. Utilities, healthcare, real estate, and consumer staples posted modest gains, underscoring a rotation into lower-volatility assets amid elevated uncertainty. With the full economic impact of the new tariff regime still unfolding, European equities are likely to remain reactive to geopolitical developments and central bank signals in the near term.