Markets slump as Trump recommends 50% tariff on EU, targets Apple
LONDON (Reuters) -U.S. President Donald Trump said on Friday he is recommending a straight 50% tariff on goods from the European Union starting on June 1, saying the EU has been hard to deal with on trade.
Stock markets across Europe fell sharply with the STOXX 600 index last down 1.8%, U.S. stock index futures moved sharply lower while the euro trimmed its gains.
Trump earlier said he would impose at 25% tariff on Apple (NASDAQ:AAPL) iPhones that were sold, but not manufactured, in the United States, sending the company’s shares down sharply in premarket trading and weighing on the tech sector more broadly.
COMMENTS:
ON EU TARIFFS:
KALLUM PICKERING, CHIEF ECONOMIST, PEEL HUNT, LONDON
"The market is giving the signal that this policy move by the U.S. - judging by what we see in currencies - is probably amplifying problems that the U.S. economy has.
To a certain extent, we’ve seen this before. Donald Trump, when he’s not getting what he wants in negotiations, tends to escalate. The EU is a big economic entity with influence in trade negotiations and probably thinks it can stand its ground with America and will be prepared to tolerate some pain, as opposed to giving into requests from Trump that EU officials think are unreasonable."
HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG, LONDON:
"This is a major escalation of trade tensions. With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the US and European economy. But Trump is highly volatile and I would not bet on this coming through."
GERRY FOWLER, HEAD OF EUROPEAN EQUITY STRATEGY, UBS, LONDON:
"The 10% tariff that Europe is currently experiencing was always going to be a best case scenario considering that’s what the UK was able to achieve anyway. So tariffs were likely to go up, they could obviously in the worst case scenario not only be 20% but potentially higher, but also cause retaliation against some of the Mag 7.
So this is much worse but it is also a bit like the China tariffs -probably not a sustainable tariff.
"Even the fact that he’s used the phrase “I recommend” suggests this is part of the late stage negotiation tactics. But if they’re even close to being implemented, then obviously Europe’s retaliation would be very significant so quite problematic."
FIONA CINCOTTA, SENIOR MARKET ANALYST, CITY INDEX, LONDON:
"The market was in this sense of perhaps there are going to be trade deals and worst case scenario is potentially being avoided after Liberation day and then there was that pause. But this latest threat is worse than the worst case scenario."
"We’re seeing a big impact in equities in Germany particularly, because they’re very much an export nation to the US, which will be impacted and so those companies are going to see profits hit, they’re going to see revenue and margins hit. So we’re seeing the this play out much more in the equities market than others."
JOHN CANAVAN, LEAD ANALYST, OXFORD ECONOMICS
"Treasury yields are lower ahead of the open this morning in response to a safe-haven bid over the past few minutes on additional tariff threats from President Trump. U.S. equity index futures spent most of the night narrowly mixed, but have declined on the latest development. The dollar index has been falling steadily throughout the night, with additional losses after the latest tariff threats."
ON APPLE TARIFFS:
MATTHEW TUTTLE, CHIEF EXECUTIVE OFFICER, TUTTLE CAPITAL MANAGEMENT, RIVERSIDE, CONNECTICUT
"The flip-side of Trump’s inner circle are the stocks that Trump has issues with. That will impact Apple, at least today. It should also impact any other tech names making products overseas."
"This would result in an iPhone price point that is a non-starter for Cupertino and translate into iPhone prices of ~$3,500 if it was made in the U.S. which is not realistic as this would take 5-10 years to shift production to the U.S. We believe the concept of Apple producing iPhones in the US is a fairy tale that is not feasible."
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