European financial markets were rattled on Friday after U.S. President Donald Trump proposed a 50% tariff on European Union goods, effective June 1. The announcement triggered a widespread sell-off across equities and bonds, raising concerns about a renewed transatlantic trade war.
The Stoxx Europe 600 index fell by 2%, with heavy losses in auto and banking sectors, both dropping over 3%. The proposed tariffs are expected to hit export-heavy industries the hardest, especially Germany’s automotive giants and France’s financial institutions.
In bond markets, investor fears of slowing economic growth prompted a rally in safe-haven government debt.
-
Germany’s 2-year bond yield fell 10 basis points to 1.73%,
-
10-year bund yields dropped 9 basis points to 2.55%,
reflecting growing bets on further European Central Bank (ECB) monetary easing in the months ahead.
Meanwhile, the euro pared gains, last trading 0.4% higher at $1.1313, having given up a larger early-session advance.
Market analysts warn that if implemented, the tariffs could undermine the fragile economic recovery in the eurozone, disrupt trade flows, and increase pressure on the ECB to act preemptively with rate cuts or asset purchases.
With geopolitical tensions on the rise and policy uncertainty looming, investors may need to brace for heightened market volatility in the weeks ahead.
