Stock markets across Europe surge following Trump's decision to put a hold on trade tariffs.
In a surprising turn of events, European markets experienced significant increases today, with London's FTSE 100 rising by 5.3% to 8,089.72, Frankfurt's DAX soaring by 7% to 21,124.44 points, and Paris' CAC 40 climbing by 7.3% to 7,362.06 points. These increases followed rallies on Wall Street and in Asian markets, as well as the suspension of higher U.S. tariffs against Chinese goods.
The tariff changes have been a contentious issue throughout the year, with the U.S. initially imposing tariffs on Chinese goods reaching as high as 145% in early 2025, before scaling them back to a flat 30% rate. However, in a recent trade deal announced in June, President Trump declared that U.S. tariffs on Chinese goods will be set at 55%. This 55% tariff includes a 10% baseline "reciprocal" tariff on imports from nearly all U.S. trading partners, plus 20% additional tariffs specifically on Chinese imports and the existing 25% from prior levies during Trump’s earlier term. China has kept its tariffs steady at 10% in response.
The suspension of the higher tariffs against all countries except China has brought some relief to global markets, which had previously fallen around 3% due to Trump's tariffs and China's retaliation. However, the tariff situation remains uncertain, as there had been a 90-day freeze on sweeping U.S. tariffs, set to expire on July 9. After this date, tariffs could rise substantially if further trade deals are not finalized.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, commented on the situation, stating, "The fire sale in US Treasuries dialled up the pressure to a point that apparently became unbearable -- even for Trump." She added, "The 'red line' for Trump was a selloff of US government bonds."
Deutsche Bank analysis suggests that the genie is still out of the bottle on policy unpredictability. The European Union, particularly the Eurozone, has experienced sharp declines in industrial output and a plunge in exports to the U.S., attributed largely to this tariff turmoil. Asian markets, especially China, have been deeply involved in these dynamics, balancing retaliatory measures with commitments to the new trade framework.
Experts warn that if even a portion of the proposed tariffs remain, the U.S. tariff levels would reach heights unseen in decades, potentially triggering the largest trade war in history. The effects extend well beyond the U.S. and China, impacting multiple industries and regions including European and Asian economies due to trade connections and reciprocal retaliations. This situation has caused currency fluctuations such as the depreciation of the U.S. dollar immediately after tariff announcements.
In summary, the U.S.-China trade war in 2025 is characterized by sharply heightened tariffs with a newly negotiated but fragile truce in place. The situation continues to evolve with looming expiration of tariff freezes, ongoing negotiations, and significant adverse impacts on global markets, particularly in Europe and Asia. The trade war remains a critical factor influencing international economic stability and trade flows.
In light of the current U.S.-China trade war, the finance and technology sectors are carefully monitoring the situation as the tariff levels, if left in place, could reach unprecedented heights, potentially causing a ripple effect on industries and economies across Europe and Asia. The uncertainty surrounding the trade deal and the expiration of tariff freezes has the potential to impact business decisions related to investing in these regions.
