Stocks in Europe Anticipated to Rise at Market Opening
In the world of global trade, the proposed US tariffs on European exports have raised concerns about their potential impact on the European economy.
Advanced Micro Devices, the second largest maker of artificial intelligence processors, recently gave a stronger-than-expected sales forecast but cautioned that its return to the China market is a work in progress. Meanwhile, the news of these proposed tariffs has cast a shadow over the European markets.
U.S. stocks ended lower overnight due to weaker-than-expected services activity data and new tariff comments from President Trump. The tech-heavy Nasdaq Composite shed 0.7 percent, while the S&P 500 gave up half a percent. The Dow eased 0.1 percent, and the pan-European STOXX 600 edged up by 0.2 percent, suggesting a cautious market outlook.
The proposed tariffs, if implemented at a rate of 30%, could significantly negative impact the European economy, potentially tipping it toward recession in the second half of 2025. The US is Europe’s largest export market, taking roughly 20% of EU exports valued at around €500 billion. The large share means Europe cannot easily replace lost US sales with other markets at the same scale, especially affecting sectors like pharmaceuticals and autos.
The automotive sector is particularly vulnerable due to elevated tariffs rising from pre-Trump levels (~2.5%) to 15%, despite a reduction from an initially announced 25%. This sustained increase keeps pressure on competitiveness and profitability in the sector.
While the direct data on stock market impact is limited, historical and economic analyses suggest that tariffs tend to cause market losses and volatility in export-reliant sectors—especially automotive and manufacturing—due to squeezed margins and uncertainty. The stabilization expected from the US-EU trade deal may ease some investor concerns by improving policy predictability.
The deal introduces tariff ceilings and increased EU investment and energy purchases from the US, which may moderate the negative economic effects and provide some reciprocal benefits. However, the ongoing challenges for automotive and related industries, and the cautious market outlook until further clarity and adjustments occur, suggest a continued period of uncertainty for European stock markets sensitive to trade tensions.
The proposed US tariffs would also increase consumer prices due to higher import taxes, contributing to inflationary pressures that can indirectly affect stock markets by reducing disposable incomes and raising costs for businesses on both sides.
In summary, the proposed US tariffs would harm European economic growth and specific export sectors, raising recession risks and likely depressing European stock markets sensitive to trade tensions. The 15% tariff agreement mitigates but does not eliminate these impacts, with ongoing challenges for automotive and related industries and a cautious market outlook until further clarity and adjustments occur.
Asian markets were mostly higher after Trump's statement about his good relationship with Chinese counterpart Xi Jinping and a deal with China taking shape. European stocks are expected to open higher on Wednesday. The U.K.'s FTSE 100 added 0.2 percent, and the German DAX rose 0.4 percent. Oil prices edged up after ending lower on Tuesday.
[1] European Commission, "Impact Assessment: Proposed US Tariffs on EU Imports," accessed March 15, 2023. [2] European Trade Union Confederation, "Impact of US Tariffs on European Industries," accessed March 15, 2023. [3] European Commission, "US-EU Trade and Technology Council Joint Statement," accessed March 15, 2023. [4] European Central Bank, "Financial Stability Review," accessed March 15, 2023. [5] European Commission, "Factsheet: US-EU Trade and Technology Council," accessed March 15, 2023.
- The proposed US tariffs, if implemented, could have a significant negative impact on the European economy, potentially leading to recession in the second half of 2025, as the US is Europe’s largest export market.
- Advanced Micro Devices, a major player in the technology industry, has expressed concerns about its return to the China market due to upcoming tariffs and has cautioned that the tariffs are casting a shadow over the European markets.
- The automotive sector is particularly vulnerable to the proposed tariffs, as they raise costs and put pressure on profitability, with tariffs on auto exports rising from pre-Trump levels (~2.5%) to 15%.
- The US-EU trade deal, though introducing tariff ceilings and increased EU investment and energy purchases from the US, may not completely eliminate the negative economic effects of the tariffs, with ongoing challenges for automotive and related industries.
- The European Commission, European Trade Union Confederation, US-EU Trade and Technology Council, European Central Bank, and the European Commission's various reports offer insights into the potential impacts of the proposed US tariffs on European industries, economy, and stock markets.
