Trade War Tensions: European Markets Tumble Amid New Tariff Threats

European shares plummeted sharply on Friday, owing to heightened tariff threats from U.S. President Donald Trump against the European Union and tech giant Apple. The looming trade war impacts ignited fears of economic decline, as Trump proposed a 50% tariff on EU goods effective June 1, impacting luxury and pharmaceutical sectors significantly. Furthermore, Apple faced a potential 25% levy on iPhones sold, but not manufactured, in the U.S.

Market analysts expressed concern, with Fiona Cincotta from City Index noting that the threat exceeds worst-case expectations. The pan-European STOXX 600 index dropped 1.9% by midday, poised for a weekly drop after consistent gains. Euro zone stocks experienced a steeper 2.2% decline, while volatility surged to its highest in over four weeks.

Despite early recoveries attributed to U.S. trade deals with the UK and a temporary pause with China, the markets saw widespread losses. Germany's DAX, nearing record highs earlier, fell significantly as did stock indexes in France, Spain and Italy. The UK's FTSE 100 managed relatively minimal losses at 1%. Expectations of rate cuts by the European Central Bank rose amid fluctuating bond yields, as economic pressure persisted from surging U.S. Treasury yields and mixed euro zone business signals.

(With inputs from agencies.)