European stock markets dipped on Monday after President Trump threatened goods from the European Union with a 30 percent tariff if a deal couldn’t be reached by the end of the month. U.S. stocks were also set to open lower, according to futures markets.
The Stoxx Europe 600 index fell 0.3 percent as traders weighed the economic threat to the region from higher tariffs. German Chancellor Friedrich Merz said over the weekend that 30 percent tariffs would hit his country’s exporters “to the core.”
Futures for the S&P 500 index were down 0.3 percent. In addition to the European Union, Mr. Trump also threatened Mexico with a 30 percent tariff rate in letters posted on social media on Saturday.
The letter to the European Union came as a surprise given the “constructive tone” of recent talks between the bloc and the United States, wrote Sven Jari Stehn, an economist at Goldman Sachs, in a note. It has “reignited concerns around the euro area outlook,” he added.
But, in a reflection of the relatively muted market response, many analysts said they expected that tariffs would ultimately settle at lower levels. Mr. Stehn said he maintained his expectation that tariffs would be 10 percent on most goods, but 25 percent on some critical sectors including steel, autos and pharmaceuticals.
“By now, investors know the drill: A lot will change between today and 1 August, and the numbers thrown around at the moment are so high that they are ridiculous,” analysts at the investment bank Panmure Liberum noted. However, the European Union still faced “many obstacles” completing a trade deal with the United States before the higher tariffs are set to kick in, the analysts added.
The FTSE 100 index in London rose 0.4 percent. The analysts at Panmure Liberum said Britain had become a “trade war winner” as its agreement with the United States — a 10 percent tariffs on most goods, and zero tariffs on a quota of car and steel imports — could create an opportunity for European businesses to make and ship goods via Britain.
An index of the dollar against other major currencies was flat on Monday. The euro was trading at nearly $1.17. Earlier this month, the euro hit its highest level in nearly four years. The 10-year yield on U.S. Treasuries was little changed, at 4.4 percent.
“Markets are clearly not pricing in these higher tariffs,” analysts at Deutsche Bank said in a research note. “We may only know the outcome in the final hours, offering the potential for a sharp market reaction and heightened volatility.”
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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