European Stocks Sink as EU, China Retaliate on Trump’s Tariffs

(Bloomberg) — European stocks fell to the lowest since January 2024 as the EU and China retaliated with higher tariffs on the US, escalating President Donald Trump’s trade war.

The Stoxx Europe 600 Index tumbled 3.5% by the close, with about 97% of its constituents in the red. Health care, energy and real estate stocks fell the most.

The European Union approved tariffs on €21 billion ($23.2 billion) of US goods in retaliation for the 25% duties Trump imposed last month on the bloc’s steel and aluminum exports. China said it would raise the tariff on US goods to 84% from 34%, effective April 10.

US imports from the European Union will be taxed at a 20% rate under the latest tariffs, while Trump’s latest levies on China take the cumulative rate announced this year to 104%. The moves have shaken global markets and asset classes, with US government bonds sliding amid growing cracks in the haven status of Treasuries.

European drugmakers were among the biggest laggards after Trump said “a major tariff” on the industry would be coming soon. Novo Nordisk A/S fell 6.9%, Novartis AG dropped 6.4% and Roche Holding AG was down 5.8%. 

“This isn’t a buy opportunity yet,” said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia. “We’re waiting for some clarity on where tariffs will land, and the longer this goes on, the major risk of an accident in financial markets.”

Dominik Schmidlin, head of investment strategy and research at St. Galler Kantonalbank, said he expects more volatility over the coming weeks. “We are positioned defensively amid the current uncertainty with a slight underweight on equities.”

Trump’s sweeping tariffs are threatening to upend the global economic order and raising fears about a recession. Europe’s equity benchmark index is now down for this year, following a record first-quarter outperformance against US stocks in dollar terms.  

“The market is panicking, and for the right reasons,” said Charu Chanana, chief investment strategist at Saxo Markets. “This isn’t just about tariffs or FX — it’s about capital flows, geopolitics and fiscal sustainability colliding in real time.”

Here is what market participants are saying:

Laurent Lamagnere, head of development at Alphavalue

“There are concerns now that there could be very heavy losses among hedge funds seeking to unwind highly leveraged basis-trades. There’s a sense of panic in some areas of the market that that something systemic could happen should a major hedge fund fall while unwinding a big trade. There’s also speculation floating around that the Fed could intervene.” 

Guillermo Hernandez Sampere, head of trading at asset manager MPPM

“The markets are providing a clear response to the current developments. In addition to the loss of assets, confidence is being severely strained. A reasonable solution is currently not in sight.”

Alexandre Baradez, chief market analyst at IG in Paris

“What’s clear now is that the US bond market is no longer a safe haven for investors but on the contrary is pilling on pressure on stock markets. We’re in a moment when both asset classes are falling at the same time. We’re well into an escalation phase in the trade war and investors have just nothing to hold on to at the moment.”

Jerome Legras, head of research at Axiom Alternative Investments

“The implementation of the Trump administration’s trade plan was much more extreme and absurd than what the market had anticipated. Investors were taken aback and if Trump’s idea was to lower US yields, then it backfired spectacularly. To be honest I’m a bit perplexed by what’s going on 10-year US treasuries, there are several theories floating around, like foreign investors selling or hedge funds unwinding trades but none is really satisfying.”

Thomas Wille, chief investment officer at Copernicus Wealth Management

“The stock market has infected the bond market, volatility has risen massively, within three days the 10-year treasuries have risen by over 50 basis points. It cannot be ruled out that the US Fed will take action at the long end of the curve this week. European equities are under massive pressure, especially pharmaceutical stocks, as the next tariff hammer is expected there. The headline risk is currently massively high, which is why we are sticking to our defensive positioning and favouring both gold and defensive sectors. It cannot be ruled out that the central banks (US Fed and ECB) will become more active this week.”

Dan Boardman-Weston, chief investment officer at BRI Wealth Management

“It looks pretty miserable. I can’t remember a period of markets being so volatile. You’ve really got this whipsawing around as markets are looking for any clue on where things are going to go. We’ve reduced a little bit of our equity exposure to give us some dry powder to deploy at some point. But we don’t think we’re at the bottom of this yet. This is the first-round effect as people try to figure out what the tariffs mean. As they start physically impacting companies and the consumer, you’ll get the second-round effect as earnings will go lower. There will be stresses in the banking system as well potentially.”

David Kruk, head of trading at La Financiere de L’Echiquier

“Some investors were happy to buy the dip with the S&P at 5,000 points but I have doubts. It’s not a given that the 5,000 to 5,200 range will hold. I don’t think it’s wise to buy this market on valuation grounds only when there’s a recession on the horizon. There needs to be something more fundamental to prop up the market. What we need is good news on tariffs, good news on US treasury adjudications and some visibility when the earnings season unfolds. We’re not there yet.”

For more on equity markets:

• Tariffs Turn Defensive Pharma Into Risky Bet: Taking Stock
• M&A Watch Europe: Anglo, Assura, EQT, Santander, Shein IPO
• US-China Tensions Deal New Hurdle to Shein IPO Plans: ECM Watch
• US Stock Index Futures Decline as Trump’s Tariffs Implemented
• The City Braces for Impact: The London Rush

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–With assistance from Kurt Schussler and Macarena Muñoz.

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