Markets in Europe surge following trade agreement between Trump and the EU
The trade deal agreed upon by President Donald Trump and the European Union has brought a positive short-term impact on European stock markets. After the announcement, various European stock exchanges reached four-month highs, reflecting investor optimism about easing trade uncertainty.
Notably, shares of European automakers surged by up to 3% at the start of trading, a clear indication of relief from the worst tariffs that were initially threatened. Industries such as automakers now face a 15% tariff on most EU exports to the US, which, while higher than the previous 2.5% rate, is less severe than the initially feared 25-30% tariffs.
The automotive, aviation, and semiconductor sectors were partly spared from the worst tariff hikes, which likely helped stabilize these industries in the short term. However, there are concerns about longer-term economic pain for EU economies and industries, particularly in export-heavy countries like Germany and Italy, and sectors like automotive and industrial machinery.
The uncertainty remains because tariffs cause higher costs and trade distortions that could depress demand in the US market or force EU exporters to absorb the costs, impacting profitability and growth. The appreciation of the euro adds to competitiveness challenges for EU exporters in the US.
In London, the FTSE 100 jumped over 0.4 per cent, while in Paris, the Cac 40 was up over one per cent. Germany's DAX and Amsterdam's AEX were nearly one per cent up. Notably, French car parts supplier Valeo increased nearly 5% as markets opened, and Vauxhall-owner Stellantis, Porsche, and Mercedes-Benz group each rose over 2% in early trading.
The trade agreement comes after months of discussion, and attention now turns to Beijing where the US and China are expected to extend their reciprocal tariff truce by another 90 days. The Shanghai, China's flagship stock exchange, closed its latest session up 0.12%.
Derren Nathan, head of equity research at Hargreaves Lansdown, commented that there's potential for indices both sides of the Atlantic to reach new high-water marks today. However, the deal provides temporary relief and clarity but brings significant tariffs that could hamper EU exports in the longer term, especially in industries relying heavily on the US market.
| Impact Area | Effect | |------------|--------| | European Stock Markets | Rose to 4-month highs; investor confidence improved | | Automakers | Shares rose up to 3% on relief from worst tariffs | | Tariff Level | 15% on most EU exports (higher than previous 2.5%, less than feared 25-30%) | | Longer-Term Outlook | Risk of economic loss for EU, particularly in export-heavy countries and sectors like autos | | Market Sentiment | Easing of tariff uncertainty but concerns about concessions made by EU |
- The trade deal reached by President Trump and the European Union led to a positive short-term impact on European stock markets, with various exchanges surpassing four-month highs.
- European automakers, such as Vauxhall-owner Stellantis, Porsche, and Mercedes-Benz group, saw their shares surge by up to 3% at the start of trading, indicating relief from the worst potential tariffs.
- The agreement, while providing temporary relief and clarity, carries the risk of longer-term economic pain for EU economies, particularly in export-heavy countries like Germany and Italy and sectors like automotive and industrial machinery.
- Derren Nathan, head of equity research at Hargreaves Lansdown, commented that indices both on this side and across the Atlantic have the potential to reach new high-water marks today, but the deal includes significant tariffs that could hamper EU exports in the longer term, especially for industries relying heavily on the US market.
