European stock futures saw a sharp decline following US President Donald Trump’s announcement of a 25% tariff on auto imports, triggering concerns over the global economic outlook and causing investors to pull back from riskier assets. Euro Stoxx 50 contracts dropped by 0.6%, mirroring a modest pullback in Asian markets. The Mexican peso also weakened, while shares of major automakers such as Toyota, General Motors, and Ford experienced losses. In contrast, US equity-index futures saw a slight uptick.
Trump’s tariff move, which targets foreign-made vehicles, has stoked fears of escalating trade tensions, with potential repercussions for the broader economy. The president further warned that additional tariffs could be imposed on the European Union and Canada if they act in concert against the US.
The abrupt shift in US trade policy has added to investor unease, compounding existing worries about global trade dynamics and economic growth. Just two months into Trump’s presidency, market sentiment has soured, with investors scaling back optimistic forecasts and the Federal Reserve signaling a cautious stance on interest rate changes.
“Tariff-related headlines have once again shaken market confidence,” said Jun Rong Yeap, a market strategist at IG Asia. “The link between tariffs and heightened recession risks has investors rushing to the exits, as evidenced by today’s market movements.”
Trump’s executive order, announced on Wednesday, calls for a 25% tariff on all cars imported to the US, effective April 3 at 12:01 a.m. Washington time. The tariffs will apply to vehicles not manufactured in the US, marking a significant shift in the nation’s trade policy.
The president also indicated that the forthcoming reciprocal tariffs would be “very lenient,” and hinted at a possible tariff reduction for China in exchange for progress on the sale of ByteDance Ltd.’s TikTok platform to a US company.
In currency markets, the US dollar fell against all of its major counterparts as Trump downplayed the impact of reciprocal tariffs. Fiona Lim, a senior strategist at Malayan Banking Bhd. in Singapore, suggested that Trump may be recognizing the negative impact of his trade policies on US consumers and businesses, which could undermine the dollar’s strength.
The European Union, meanwhile, is preparing to announce retaliatory tariffs as early as next week. Among the EU’s options is the deployment of its anti-coercion instrument, a powerful trade tool developed in response to Trump’s earlier policies.
The rising uncertainty surrounding global trade is also weighing on US stock market liquidity, creating additional challenges for institutional investors. According to data from Deutsche Bank, liquidity in S&P 500 stock-index futures has hit a two-year low, raising concerns about increased volatility in broader markets.
Federal Reserve officials are also closely monitoring the situation. St. Louis Fed President Alberto Musalem noted that the long-term effects of tariffs remain unclear, and warned that secondary consequences could lead to a prolonged period of stable interest rates.
While some analysts, such as Carol Kong from Commonwealth Bank of Australia, do not foresee a US recession, the market is pricing in higher risks as additional tariffs are expected. This has contributed to a stronger US dollar against major currencies.
In commodity markets, gold surged toward its record high amid rising trade tensions, while oil prices saw a slight decline.
Market Movements:
Stocks:
- S&P 500 futures rose by 0.1%
- Nasdaq 100 futures remained largely unchanged
- MSCI Asia Pacific Index showed little movement
- Hong Kong’s Hang Seng increased by 0.7%
- Shanghai Composite rose by 0.1%
- Euro Stoxx 50 futures fell by 0.6%
Currencies:
- The Bloomberg Dollar Spot Index dropped by 0.1%
- The euro rose by 0.2% to $1.0778
- The Japanese yen remained steady at 150.43 per dollar
- Offshore yuan gained 0.1% to 7.2709 per dollar
- The British pound rose 0.3% to $1.2925
Cryptocurrencies:
- Bitcoin increased by 0.1% to $87,379.73
- Ether gained 0.7% to $2,025.08
Bonds:
- 10-year US Treasury yield rose one basis point to 4.36%
- Germany’s 10-year yield held steady at 2.80%
- Britain’s 10-year yield decreased three basis points to 4.73%
Commodities:
- Spot gold rose by 0.3% to $3,029.02 per ounce
- West Texas Intermediate crude remained mostly unchanged
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