European stocks slip after Donald Trump’s tariff threat

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European stocks slipped on Monday morning as investors responded to Donald Trump’s threat of 30 per cent tariffs on the EU, the latest escalation of his trade war.

Germany’s Dax index was down 1 per cent in early trade while France’s Cac 40 fell 0.8 per cent. The broad Stoxx Europe 600, which includes non-EU markets such as the UK, fell 0.6 per cent.

The moves came after the US president announced the planned levies on Saturday, pushing the bloc to delay its planned retaliatory tariffs on the US in the hope of coming to an agreement with Washington before the August 1 deadline.

Trump’s announcement marked the latest in a series of trade threats from the US administration over the past week. Market reaction has been limited, with some investors saying they expect Trump to step back from his steepest threats before August 1.

“After a period of relief that tariffs would be manageable amidst a lot of empty threats, some concerns are building that the market performance itself may encourage Trump to push further,” said Guy Miller, chief market strategist at Zurich. “I think that is legitimate, with a high risk of disruption over the summer, albeit more modest and contained than April.”

A Stoxx 600 sub-index tracking carmakers and other auto companies fell 1.1 per cent.

The euro was little changed, dropping 0.1 per cent against the dollar.

Futures contracts tracking Wall Street’s S&P 500 index were pointing 0.5 per cent lower on Monday morning.

Peter Schaffrik, chief European macro strategist at RBC Capital Markets, said that the relatively muted market reaction was partly a bet that the 30 per cent threat is a negotiation tactic by Trump.

However, he added: “Personally I’m a little bit more worried. We’ve been here before.

“If there’s no negotiated settlement, I can’t see how the EU just takes it lying down — so they probably will retaliate.”

Analysts say a much larger sell-off is likely if the 30 per cent tariffs — which Trump also threatened against Mexico on Saturday — do come into force.

Barclays wrote that “if the US were indeed to increase tariffs on EU goods to 30%, the risk of retaliation and a deeper recession would likely send equities down double digits”.

However, the Barclays note cautioned that “we are sceptical tariffs will settle at the high levels threatened by Trump”.