The Financial District in the City of London, England, on Monday. European and U.K. stock markets were down sharply following after falls in Asia overnight after U.S. President Donald Trump imposed tariffs on Mexico, Canada and China at the weekend and threatened to do the same to the European Union. Photo by Andy Rain/EPA-EFE
Feb. 3 (UPI) — European stock markets tumbled Monday on the back of sharp falls on Asian bourses overnight as fears of a global trade war escalated after the European Union said it would respond in kind if the United States imposed tariffs on the 27-member-country bloc.
In mid-morning trade, Germany’s main Xetra DAX index was down 1.84%, France’s CAC 40 by 1.85% and the wider Stoxx 50, the eurozone’s blue-chip index, was off by 1.87%.
In London, the FTSE 100 fell by 1.3% after U.S. President Donald Trump told the BBC that Britain was also “way out of line” but that he believed the issues could be “worked out.”
The falls came after markets in the Far East saw big declines with Japan’s benchmark Nikkei 225 ending the trading day in Asia down 2.66% and Korea’s main KOSPI index down 2.52%.
China markets, however, held up better, ending more or less flat with Hong Kong’s Hang Seng Index shedding just 7.85 points while the Shanghai Composite Index closed just 2 points lower.
Donald Trump signed executive orders under the Emergency Economic Powers Act on Saturday imposing 25% tariffs on imports from Canada and Mexico with much of the sell-off driven by apprehension over the start of the tariffs, particularly for Mexico goods, due to take effect Tuesday.
The big three Japanese car companies were hit hard with shares in Honda plunging 7.2%, Nissan by 5.63%, and Toyota 5%. All three have plants in Mexico supplying the United States and other markets, established to take advantage of the tariff-free trade offered by NAFTA. Over in Korea, Kia Corp. shares slumped 5.78% and Hyundai Motor’s fell by 1.94%.
European auto giants like Volkswagon were being hammered during Monday trading with shares in the company down 6.69%. Netherlands-headquartered Stellantis — maker of Chrysler, Dodge, Jeep, Peugeot, Citroen, Alfa Romeo and Maserati — was trading below 12 euros, down 7.88%.
Both companies manufacture vehicles in Mexico, many of which are destined for the forecourts of U.S. dealerships.
Asked over the weekend whether the EU was next in line for tariffs, Trump said it “absolutely” was.
“They don’t take our cars, they don’t take our farm products. They take almost nothing, and we take everything from the millions of cars, tremendous amounts of food and farm products,” he said.
However, he did not give any date as to when he might take action against Brussels.
The United States’ trade deficit with the EU widened to $208.69 billion in 2023, up from $202.83 billion the previous year, U.S. Census Bureau figures show.
The European Commission said Sunday that while it was not aware of any new levies on EU imports into the United States it “would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.”
“Our trade and investment relationship with the U.S. is the biggest in the world. There is a lot at stake,” it said. “Tariffs create unnecessary economic disruption and drive inflation. They are hurtful to all sides.”
French Industry Minister Marc Ferracci called for any potential EU retaliation to have the maximum impact by targeting industries that are key to the U.S. economy in order to be taken seriously.
He urged the European Commission to come forward with “Buy European” legislation.
German Chancellor Olaf Scholz cautioned against trade barriers, saying they created divisions but hinting at the EU’s economic muscle, he said the bloc had “its own courses of action.”
Eager not to imperil the $1.55 trillion in EU-U.S. two-way trade — almost a third of the global total — the commission has been working on plans to deal with the possibility of tariffs for months with a focus on mollifying Trump by working to reduce the trade deficit — possibly by ramping up LNG imports from the United States, according to the Financial Times.
However, it has also been preparing a secret backup list of U.S. products it could hit with tariffs of 50% or more, the FT said.
The paper quoted an EU official as saying EU Trade Commissioner Maros Sefcovic stood ready and willing to engage with U.S. counterpart [Jamieson Greer] as soon as he was confirmed in the U.S. Senate.