European Markets Scaled Back from Record Highs After Trump Launched Global Trade War

Bridgette Randall
04 Mar, 2025
London

European markets reversed gains of the previous session after a defense rally lifted indexes to record highs. 

Benchmark indexes in Frankfurt declined 3.5% and in Paris fell nearly 2%, and the indexes in London dropped more than 1% after the U.S. launched a trade war. 

The U.S. imposed 25% tariffs on goods shipped from Mexico and Canada and slapped additional 20% tariffs on Chinese goods starting March 4. 

Canada also imposed its own set of tariffs on U.S. goods, and Mexico said it is preparing its own list of import taxes on imports by this weekend.

Canada announced 25% tariffs covering about $107 billion of U.S. goods, and China imposed 15% tariffs on corn, wheat, cotton, and chicken and 10% on soybean, pork, beef, and cotton.

Most European automakers have manufacturing plants in Mexico, which provide proximity to the U.S. and an affordable labor force. 

Donald Trump, during his first presidential administration, imposed similar punitive tariffs mostly targeting China, which ended up raising prices in the U.S. and destroying about 300,000 jobs over the four years.

The current level of tariffs covering a wider range of countries is likely to increase annual costs to U.S. households by $1,700.

In stock trading on Tuesday, Mercedes Benz, BMW, Stellantis, Renault, and Volkswagen declined between 4% and 6%. 

European governments are bracing for U.S. tariffs that could span a wide range of products starting as early as April.

On the economic front, the jobless rate in the Eurozone held steady at 6.2% in January, according to a report released by Eurostat. 

The unemployment rate was steady compared to the previous month, but the rate declined from 6.5% in the month a year ago. 

The number of unemployed fell by 42,000 persons from December and declined by 547,000 from a year ago.

The youth unemployment rate fell marginally to 14.1% from 14.2% in December. 

Youth unemployment increased by 3,000 from the previous month but decreased by 93,000 from the corresponding month a year ago. 

 

Europe Indexes and Yields

The DAX index decreased by 3.5% to 22,326.81, the CAC-40 index edged lower 1.8% to 8,047.92, and the FTSE 100 index declined by 1.3% to 8,759.0. 

The yield on 10-year German bonds inched lower to 2.47%, French bonds decreased to 3.20%, the UK gilts moved down to 4.48%, and Italian bonds edged lower to 3.53%.

The euro increased to $1.05; the British pound was higher at $1.27; and the U.S. dollar was lower and traded at 89.11 Swiss cents.

Brent crude decreased $0.82 to $70.80 a barrel, and the Dutch TTF natural gas was lower by €2.09 to €43.71 per MWh.

 

Europe Stock Movers

Thales SA increased 2.5% to €228.0, and the French defense contractor reported strong annual results and estimated margin improvement in the current fiscal year. 

Continental AG dropped 11.6% to €61.34, and the automotive parts maker reported a decline in sales in 2024.

The company confirmed it sees limited improvement in profitability in 2025.

Fresnillo plc increased 3.9% to 783.50 pence after the precious metals mining company reported strong financial results in 2024.

Ashtead Group decreased 3.7% to 4,623.17 pence, and the UK-based rental company reported a decline in revenue and earnings in the fiscal third quarter ending in January.

However, the company held out for sales to increase between 3% and 5% for the full year.

Greggs plc plunged 13% to 1,812.0 pence after the bakery chain operator reported decelerating same-store sales in the first nine weeks of this year. 

The bakery chain reported full-year sales increased 11% and net income advanced 8%, largely on the back of higher prices and stable volume.