European Markets Decline as Trump’s Tariffs Take Effect

European markets opened lower on Wednesday as the impact of President Donald Trump’s sweeping new tariffs began to take hold. The significant drop across major European indexes coincides with the imposition of total import levies of up to 104% on certain Chinese goods, confirmed by U.S. Customs and Border Protection, which is preparing to collect country-specific tariffs from 86 nations.

Despite indicating openness to negotiations, Trump has confirmed that the planned tariffs on Chinese imports will move forward, having signed an executive order that triples tariffs on low-value Chinese goods to 90%, effective May 2. Trump commented on his strategy of forming “tailored deals” with select nations, noting that some Asian countries and the European Union have shown willingness to engage in discussions. However, since China’s declaration on Tuesday to “fight to the end,” there has been no further communication from Beijing. “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 stated at the White House.

In response to the tariffs, Germany’s DAX fell by 2.99%, while London’s FTSE 100 dropped 2.55%. Italy’s FTSE MIB declined by 2.63%, and Spain’s IBEX 35 lost 2.34%. The European automotive sector also faced declines, with shares of Volkswagen AG down 1.06%, Mercedes-Benz Group AG falling 1.31%, and Ferrari N.V. decreasing by 1.06%.

Asian Markets Experience Continued Declines

Asian equity markets resumed their downward trajectory, with Hong Kong’s Hang Seng Index falling nearly 2%, Japan’s Nikkei 225 plummeting 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 U.S. dollar for the fifth consecutive session, pushing the USD/CNY pair to 7.35, a level not seen since September 2023. Analysts expect a gradual weakening of the Yuan to prevent disorderly market movements that could trigger capital outflows. South Korea has announced a US$2 billion emergency support package for its carmakers, warning that Trump’s 25% tariffs on automobiles would significantly impact the sector.

India’s Nifty 50 index showed more resilience, down just 0.55%, following the Reserve Bank of India’s decision to cut its benchmark rate for the second consecutive time to 6%, adopting a more accommodative policy stance. New Zealand’s stock market also outperformed the broader region, with a decline of only 0.6%, as the Reserve Bank of New Zealand lowered its official cash rate for the fifth straight meeting to 3.5%.

U.S. Stock Futures Decline

U.S. stock futures also experienced sharp declines, with the S&P 500 down 2.56%, the Nasdaq sliding 2.76%, and the Dow Jones Industrial Average falling 2.18% as of 5:18 a.m. CET. The earlier rally on Wall Street was short-lived as uncertainty deepened following Trump’s commitment to proceed with the tariffs on China. Michael Brown, a senior research strategist at Pepperstone London, noted, “Fundamentally, it will be tough to turn bullish unless the Trump administration begins to either make policy in a coherent manner, strikes a less hawkish tone on tariffs, or starts rolling back ‘reciprocal’ duties through country-specific deals.”

Haven Assets Gain Amid Risk-Off Sentiment

The prevailing risk-off sentiment has driven gains in traditional haven assets, including gold, the Japanese yen, the euro, and the Swiss franc. Spot gold rose over 1% to hit a daily high of $3,018 per ounce, while the euro climbed 0.7% against the U.S. dollar to 1.1037, nearing a seven-month high. The dollar weakened 0.65% against both the Japanese yen and the Swiss franc, reaching levels last seen in October 2024. However, U.S. Treasuries saw heavy selling, particularly in longer-dated government bonds, indicating growing skepticism about the economic outlook in the U.S. The yield on 30-year U.S. Treasuries surged 20 basis points to a year-high level on Tuesday.

Oil Prices Continue to Decline

Crude oil prices extended their losses, 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.