Trump’s Tariff Threats Hit European Markets From Cars to Credit

Group 1 - The announcement of a 10% tariff on goods from eight European countries, effective February 1, is expected to negatively impact risk sentiment in the market, particularly affecting European equities [2][3] - European leaders, including French President Emmanuel Macron, have responded by considering the activation of the EU's anti-coercion instrument and may halt the approval of a trade deal with the US that includes a 15% tariff on most EU goods [2] - The potential escalation of tariffs could lead to a risk-off market environment, benefiting government bonds and quality assets, while gold may see increased demand [3] Group 2 - The immediate impact of the tariff announcement is anticipated to be more pronounced on equities rather than bonds and currencies, especially given the thin market conditions due to the US holiday [4] - While the tariff threat may have a limited negative impact on European growth prospects, it could also serve as a catalyst for Europe to pursue greater strategic autonomy and form new alliances in the long term [5] - The tariff threat poses a risk to the recent rally in European equities, which have outperformed US equities, supported by increased fiscal spending in Germany, lower interest rates, and improving profit expectations [6]