The Initial Tariff Impact – Europe Market Wrap

Investors dumped stocks and fled for the safety of Treasuries as President Donald Trump’s bid to remake the world trading order threatened to undermine economic growth. The dollar headed for its steepest drop in two and a half years.

US assets were among the worst affected, with futures on the S&P 500 slumping more than 3%. In premarket trading, stocks linked to global trade bore the brunt, with Apple Inc. down about 7%. Other big US technology names including Amazon.com Inc., Dell Technologies. and Tesla all fell more than 4%. Apparel and shoe makers, including Nike slid about 11%, as hefty tariffs were imposed on Vietnam and other production hubs.

It was a similar picture in Europe, where consumer goods firms including Adidas and Puma fell almost 10%. The Stoxx 600 index slipped 1.5%. Asian stocks posted heavy losses earlier, with Tokyo’s Nikkei index losing almost 3%.

Trump’s decision to slap a minimum 10% tariff on all exporters to the US, and additional duties for its biggest trading partners including China, Japan and the European Union, marks a dramatic escalation of the trade war. With China and the European Union pledging retaliation, investors are snapping up haven assets, knocking ten-year Treasury yields to the lowest in more than five months. The yen and Swiss franc rallied, while gold hit a new record high before the rally stalled.

Commodities were under pressure, with Brent crude futures down more than 4%. Copper, aluminum and zinc all traded sharply lower.