Global financial markets plunged into turmoil after US President Donald Trump unveiled sweeping new tariffs on key trading partners, fuelling investor fears of a wave of retaliatory measures and a synchronised economic slowdown.

Trump opted to apply levies calibrated to match half of the duties imposed by foreign governments on American goods. Yet, in a controversial twist, the White House also included indirect trade barriers in its calculations, such as VAT charges, product bans, subsidies, and alleged currency manipulation.

Key US partners will witness a spike in their duties: China faces a 34% tariff, Japan 24%, and the European Union 20%. Canada and Mexico are exempt under the USMCA framework.

The auto sector could suffer even more. European carmakers already face a 25% tariff on vehicle exports to the US, and additional duties will be layered on top.

The move blindsided markets, which had anticipated a more moderate approach, fuelling investor concerns over a renewed trade war and a potential global economic slowdown.

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Stock markets plunge worldwide

Global equity indices tumbled sharply. Futures on the S&P 500 fell more than 3%, on track for their worst daily loss in nearly three years. The Euro STOXX 50 dropped 2.2% as major exporters bore the brunt of the sell-off.

Shares in Adidas AG and Puma plummeted nearly 10%, with investors fearing that German sportswear firms could lose competitiveness against US rivals like Nike Inc. France’s EssilorLuxottica also fell over 4%.

The French CAC 40 index declined by 1.8%, dragged lower by steep losses in banks and luxury stocks. Societe Generale, BNP Paribas and Credit Agricole dropped 3.8%, 3.7% and 3.2%, respectively. Luxury giants Kering, LVMH and Hermès shed between 2.8% and 3.1%.

Italy’s FTSE MIB lost 1.8%, as domestic banks were hit hard: BPER Banca fell 4.9%, UniCredit 4.1%, and Banco BPM 3.5%.

Germany’s DAX index retreated 1.4%, with Commerzbank and Deutsche Bank down 6.5% and 3.6%, respectively. SAP AG, Europe’s largest listed firm by market capitalisation, fell 2.5%.

Spain’s IBEX 35 index declined 1.5%, with losses exceeding 3% in CaixaBank, Banco Santander, Banco Sabadell and Bankinter.

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Domestic-facing European stocks gain ground

Amid the broader sell-off, European firms with a domestic focus gained modestly, as markets anticipate retaliatory tariffs from EU policymakers that could level the playing field by penalising US exports to Europe.