Europe: Shares log worst day in over six months after Trump’s tariffs materialise

EUROPEAN shares retreated from record highs on Tuesday, joining a global sell-off after US tariffs on Canada, Mexico and China took effect, as investors worried about the hit to global growth and whether similar levies could be imposed on Europe.

The pan-European Stoxx 600 index closed 2.14 per cent lower at 551.07 points, and logged its worst day since August 2024.

All regional bourses closed the day in the red, with the German benchmark falling 3.5 per cent from record highs hit on Monday.

The threatened duties came into effect early on Tuesday, hitting hopes that they would be further delayed for more negotiations.

Automakers were the worst hit, with Stellantis dropping 10.2 per cent, BMW losing 5.9 per cent and Ferrari down 4.4 per cent.

The automobiles and parts sector fell 5.4 per cent, its biggest single day fall since March 2022.

“Until a few days ago, there was still hope that Trump was threatening tariffs, but wouldn’t put them through. Now it’s clear that he is and global equity markets are a bit shocked by that,” said Joris Franssen, head of the dividend and value team at Van Lanschot Kempen.

“Automobile makers have part of their supply chain and manufacturing outside of the US, which will hurt these businesses... the big question is if they are able to price these tariffs through to the end consumer.”

Financial services and banks fell 3.7 per cent and 3.8 per cent respectively, while falling oil prices dragged energy stocks 4.2 per cent lower.

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Investors were concerned about the European Union being the next target, as Trump floated a 25 per cent duty on cars and other imports from the EU last week.

The Euro Stoxx volatility index surged to a high of 22.90 points in the day, its highest since August 2024.

China, hit with an additional 10 per cent duty on the already existing 10 per cent, retaliated with a 10 to 15 per cent limited levy. Luxury stocks exposed to the country declined, with Hermes, Kering and LVMH falling between 2 per cent and 4 per cent.

The broader aerospace and defence sector, that hit a record high in the previous session on prospects of higher military spending in the region, reversed gains to fall 1.5 per cent.

Most sub-sectors on the Stoxx 600 closed lower, with the exception of utilities that ended slightly higher and food and beverages that gained 1.2 per cent.

Switzerland’s Lindt & Spruengli jumped 8.2 per cent after reporting a slightly better-than-expected full-year operating profit.

Away from tariffs, Trump paused military aid to Ukraine, reinforcing that European countries may need to increase their defence spending.

London’s abrdn and France’s Thales gained 7.7 per cent and 2.5 per cent after reporting stronger than expected earnings in 2024.

Continental AG tumbled to the bottom of the Stoxx 600 after a grim autos outlook for 2025.  REUTERS