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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.

Defensive sectors saw buying interest. Consumer staples like Danone and Carrefour, and utilities such as E.ON, Iberdrola, Enel, ENGIE and A2A rose between 1% and 2%. Telecom firms Telefonica, Orange, Deutsche Telekom, Vodafone and Swisscom also posted gains.

Euro rallies as dollar weakens

In currency markets, the dollar weakened sharply amid a flight from US assets and growing concerns over the global economic fallout from Trump’s tariff hike.

The euro surged 1.2% to $1.0990, its highest level since early October 2024. Sterling gained 1% to $1.3122, also marking a six-month high. The dollar slumped 1.5% against the Swiss franc.

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Bonds and gold attract haven flows

Sovereign bond markets rallied as investors sought safety. Germany’s 10-year Bund yield dropped 6 basis points to 2.65%. Spanish 10-year Bonos and Italian BTPs saw yields fall by 5 basis points, to 3.30% and 3.78% respectively.

Gold prices had a volatile session. The precious metal hit a fresh record high of $3,167 (€2,911) per ounce before pulling back 0.5% later in the day.

Oil and gas decline, bitcoin resists

Energy markets also reflected mounting concerns over global demand. West Texas Intermediate crude dropped 3.5% to below $70 (€64) per barrel, while Brent crude declined 3% to $72 (€65).

Natural gas prices on the Dutch TTF benchmark fell 2% to €40.2 per megawatt hour.

Despite the risk-off mood, major cryptocurrencies remained resilient. Bitcoin rose 1% on the day, trading at $83,368 (€76,030), defying broader asset volatility.