Trump’s tariff threats jolt European markets
European stocks declined on Monday, snapping a strong run in May, after U.S. President Donald Trump reignited global trade tensions with new tariff threats that rattled investor sentiment across key sectors.
The pan-European STOXX 600 index fell 0.5% in early trading, retreating from an approximate 4% gain recorded over the previous month. The drop followed Trump’s announcement late Friday of plans to double tariffs on imported steel and aluminum—from 25% to 50%—a move that drew immediate criticism from the European Union, which signaled it was prepared to retaliate.
Steelmakers such as ArcelorMittal and Aperam were among the early casualties, with both stocks down around 1%. However, the biggest losses were concentrated in automakers and luxury goods—two sectors heavily exposed to U.S. trade policy and consumer demand.
Stellantis, listed in Milan, fell 3%, while German giants Mercedes-Benz, BMW, and Volkswagen lost between 1.4% and 2%. The broader auto sector index declined by 1.6%.
Luxury stocks, often seen as vulnerable to trade frictions due to their reliance on global exports, also weakened. The sector index shed 1.6% as investors grew wary of demand disruptions in one of their key markets—the United States.
Market volatility ticked up as a result. A key European volatility index climbed 1.7 points to 20.88, its highest level in a week, reflecting investor unease.
“The latest announcement renews tensions and raises concerns about the direction of ongoing trade talks,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Trade tensions have a direct impact on luxury sales, as the U.S. remains one of the biggest export markets for major European firms.”
Regional markets broadly mirrored the continent-wide trend. Germany’s DAX was down 0.6%, while Poland’s WIG20 index dropped 1.4% following nationalist opposition candidate Karol Nawrocki’s victory in the second round of the country’s presidential election. Analysts noted the political shift is unlikely to affect Poland’s position within the European Union.
In sectoral movements, energy stocks posted gains, tracking higher oil prices after OPEC+ announced smaller-than-expected production increases for July. Meanwhile, defense-related stocks edged higher amid renewed tensions between Russia and Ukraine, as diplomatic meetings were scheduled to resume Monday.
Among individual movers, Hensoldt surged 7.2% to top the STOXX leaderboard after J.P. Morgan upgraded the German defense contractor’s stock from “underweight” to “overweight.”
In corporate news, French pharmaceutical giant Sanofi announced it would acquire U.S.-based Blueprint Medicines Corporation for $129 per share, valuing the deal at approximately $9.1 billion. Sanofi shares were down 1.2% following the news. Looking ahead, investor focus will shift to Thursday’s European Central Bank (ECB) policy meeting and Friday’s U.S. jobs data release, both expected to shape the near-term outlook for interest rates and economic growth. Remarks from Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde, along with a stream of trade bloc economic data, are also likely to drive market sentiment through the week.
