LONDON (Reuters) -U.S. President Donald Trump said on Friday that he is recommending a straight 50% tariff on goods from the European Union starting on June 1, saying the EU has been hard to deal with on trade.
Stock markets across Europe fell sharply with the STOXX 600 index last down 1.8%, U.S. stock index futures moved sharply lower while the euro trimmed its gains.
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HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG, LONDON:
“This is a major escalation of trade tensions. With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the US and European economy. But Trump is highly volatile and I would not bet on this coming through.”
GERRY FOWLER, HEAD OF EUROPEAN EQUITY STRATEGY, UBS, LONDON:
“The 10% tariff that Europe is currently experiencing was always going to be a best case scenario considering that’s what the UK was able to achieve anyway. So tariffs were likely to go up, they could obviously in the worst case scenario not only be 20% but potentially higher, but also cause retaliation against some of the Mag 7.
So this is much worse but it is also a bit like the China tariffs -probably not a sustainable tariff.
“Even the fact that he’s used the phrase “I recommend” suggests this is part of the late stage negotiation tactics. But if they’re even close to being implemented, then obviously Europe’s retaliation would be very significant so quite problematic.”
FIONA CINCOTTA, SENIOR MARKET ANALYST, CITY INDEX, LONDON:
“The market was in this sense of perhaps there are going to be trade deals and worst case scenario is potentially being avoided after Liberation day and then there was that pause. But this latest threat is worse than the worst case scenario.”
“We’re seeing a big impact in equities in Germany particularly, because they’re very much an export nation to the US, which will be impacted and so those companies are going to see profits hit, they’re going to see revenue and margins hit. So we’re seeing the this play out much more in the equities market than others.”
(Reporting by the Markets team)
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