European Economy at Risk Due to US Tariff Threats
The European economy is facing a significant threat due to the renewed tariff threats from the US. Investment banks are warning that the move could trigger a "prolonged and deeper economic slowdown" across the continent. The US President’s threat to impose a 30% tariff on European Union goods has reignited concerns around the Euro area outlook.
Impact on European Stocks
European stocks have opened lower as investors react to the latest tariff threat. The pan-European Stoxx 600 was trading close to 0.5% lower, with most sectors in negative territory. Tariff-sensitive autos stocks led losses, with the Stoxx Europe Automobiles index shedding around 1%. Germany’s DAX is leading the sell-off after moving 0.8% lower, while London’s FTSE 100 is bucking the regional trend to trade 0.2% higher.
Defense Firms Rise After Macron’s Announcement
Paris-listed defense shares are rising after French President Emmanuel Macron announced a 6.5-billion-euro ($7.6 billion) boost in defense spending over the next two years. French maritime robotics firm Exail Technologies is 4.1% higher, while jet manufacturer Dassault Aviation jumped 1.8%. French defense champion Thales gained 1.4%.
EU Official Expresses Optimism
EU Trade Commissioner Maros Sefcovic has expressed optimism that the US and the EU could find a solution. He said that the feeling on the EU side was that they are "very close to an agreement." However, he also warned that the US President’s threatened 30% tariff on the European Union would practically eradicate trade between the two economic powers.
Sectors to Watch
Earnings estimates for companies around the world have fallen sharply in recent months as analysts attempt to predict the impact of new US tariffs. Analysts are watching three key sectors as Europe’s largest companies prepare to report on their earnings. These sectors include autos, pharmaceuticals, and aircraft machinery.
Bank of England’s Bailey Says Rates Will Go Down
Bank of England Governor Andrew Bailey has said that the central bank would deepen its rate-cutting cycle should the UK’s job market slow. He believes that the path is downward for UK interest rates. His comments came as the UK’s most recent inflation print remained elevated at 3.4%.
EU-US Trade Relationship
The EU and US make up almost 30% of all global trade in goods and services and 43% of global GDP. In 2024, trade between the two totaled some 1.7 trillion euros — that’s the equivalent of 4.6 billion euros per day. However, the EU’s trade surplus is not as one-sided as the White House suggests. When it comes to goods, the EU exported around 530 billion euros’ ($618 billion) worth to the US and imported 335 billion — giving it a surplus of nearly 200 billion euros. But the US leads the way in services, where it enjoys a surplus of 150 billion dollars.
Conclusion
The European economy is facing significant risks due to the renewed tariff threats from the US. The threat of a 30% tariff on European Union goods has reignited concerns around the Euro area outlook. While EU officials are expressing optimism that a solution can be found, the impact on European stocks and sectors is already being felt. The EU-US trade relationship is complex, and the EU’s trade surplus is not as one-sided as the White House suggests. As the situation continues to unfold, it remains to be seen how the European economy will be affected.
