European equity markets traded sharply lower on Wednesday, reversing the previous session’s gains, as trade tensions escalated following the implementation of new US tariffs. These measures included a cumulative 104% levy on Chinese imports, which significantly heightened concerns about the impact on global trade.
European stocks back in the red
As a result, the STOXX 50 fell by 2.6%, and the broader STOXX 600 dropped 2.5%, erasing approximately 2% of the gains seen on Tuesday. The decline was widespread, with all sectors closing in the red. Pharmaceuticals, oil & gas, basic resources, and real estate stocks led the way down, reflecting investor fears of slowing economic activity and rising costs due to the tariff measures.
In response to these developments, the European Commission is considering retaliatory tariffs of up to 25% on a broad range of US exports, which are valued at approximately €22.1 billion. The European Union’s reaction has heightened concerns about a protracted trade war between the two economic giants. European Commission President Ursula von der Leyen spoke with Chinese Premier Li Qiang on Tuesday, offering a "negotiated resolution" to address what she called the "widespread disruption caused by the US tariffs," signaling the EU’s desire to avoid further escalation and to seek a diplomatic solution.
Major European companies were hit hard
On the corporate front, several major European companies were hit hard, with sharp declines across the board. Pharmaceutical giant Novo Nordisk dropped 5.7%, tech company SAP fell 1.9%, luxury goods maker LVMH saw a 3% decrease, food and beverage leader Nestle lost 1.6%, and semiconductor company ASML Holding shed 2.5%. These losses reflect investor concerns over the broader implications of the escalating trade dispute, which threatens to disrupt supply chains, increase costs, and slow down global growth.
Overall, Wednesday’s market action underscored the mounting uncertainty surrounding the global economic outlook, with trade tensions emerging as a key risk factor for both corporate earnings and broader economic stability.
