The euro strengthened and European stocks surged in early trading on Thursday, as Trump’s sweeping “reciprocal” tariffs – including a blanket 15% levy on EU exports – entered into force.
The STOXX Europe 600, a broad measure of European equities, was up 0.9% as of noon CEST. The DAX, a stock index comprising major German blue chip companies, rose by 1.9%, while the Paris-based CAC 40 gained 1.3%. EU equities are now up nearly 7% since January.
The euro, meanwhile, gained 0.1% to trade around €1.17 against the dollar. The single currency has surged 13% against the greenback since the start of the year, as investors have sought to diversify from dollar-denominated assets to hedge against continuing US policy uncertainty.
EU government borrowing costs remained broadly stable, with yields on German 10-year bonds – the eurozone benchmark – down 1 basis point (0.01 percentage point) to 2.63%.
“IT’S MIDNIGHT!!! BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!” US President Donald Trump wrote on his social media platform, Truth Social, earlier this morning.
Trump’s punishing levies, which purport to match the trade barriers imposed by US trading partners, are on average slightly lower than those introduced on “Liberation Day” in early April, which upended the global economy before being suspended one week later.
The strengthening euro and rising EU stocks come despite the fact that the new US duties on EU goods – agreed following a meeting between Trump and EU chief Ursula von der Leyen two weeks ago – are on average slightly higher than before.
Trump had previously imposed a 50% tariff on steel and aluminium, a 25% duty on cars and car parts, and a 10% blanket levy on most other EU exports. The duties came on top of the 4.8% average rate on EU goods before Trump returned to the White House in January.
Trump’s 50% levies on steel and aluminium remain in force, although Brussels is still pushing for a “quota system” in which some metal exports will be hit with a lower rate.
The blanket 15% tariff does not currently apply to EU car exports, despite the fact that Washington and Brussels both say autos are covered by the flat levy. EU officials expect Trump to sign an executive duty lowering the auto tariff over the coming days.
Products that are subject to a special ‘Section 232’ investigation, including pharmaceuticals and semiconductors, will continue to face the current 0% US import tax until the probes are completed.
Trump suggested yesterday that semiconductor exports to the US would soon face a 100% duty. He also said earlier this week that pharma exports could eventually face tariffs as high as 250%.
Washington and Brussels both say EU pharma and chip exports are covered by the 15% levy.
(vib)
