US tariffs trigger euro tumble and stock market slump
European stock markets rebounded on Tuesday morning after falling in the previous session, as investors weighed the implications of the US-EU trade deal. The STOXX Europe 600 jumped 0.6 per cent by midmorning, as France's CAC 40 and Germany's DAX added around 1 per cent each, aided by encouraging corporate updates. The FTSE 100 was up 0.2 per cent.
However, weakness in the single market currency continued. Stocks on this side of the Atlantic gave up early gains on Monday and the Euro tumbled as the US-EU trade deal was branded a 'humiliation' for Brussels. The single currency fell more than 1 per cent against the dollar towards $1.16 as investors bet the agreement would hurt the European economy.
Stock markets also slammed into reverse after an initial rally with the Dax closing down 1 per cent in Frankfurt and the Cac falling 0.4 per cent in Paris. In London, the FTSE 100 fell 0.4 per cent, or 38.87 points, to 9081.44. By contrast, the Nasdaq and S&P 500 hit record highs in New York.
'It's great they've made a deal, but beyond the noise it is still a worsening in trade relations, not an improvement,' said Trevor Greetham at Royal London Asset Management. Danni Hewson at AJ Bell added: 'Any questions about who gains the most from the US-EU trade deal seem to have been answered by markets with both the S&P 500 and Nasdaq hitting record highs with European markets looking a lot more subdued.'
Analysts warned the deal poses a big threat to European exporters, who shipped £450billion of goods to the US last year including cars, wine and medicines. US exports to the EU – which totalled £275billion in 2024 – will not face extra tariffs. The EU also agreed to invest an extra £450billion in the US –including on American military equipment – and spend more than £550billion on energy.
Trump hailed 'the biggest deal ever made' while von der Leyen was forced to admit it was 'the best we could get' as she faced a fierce backlash across Europe. Clemens Fuest, president of the Munich-based IFO economic research institute, said: 'The trade deal is a humiliation for the EU, but it reflects the imbalance of power. The Europeans need to wake up, focus more on economic strength and reduce their military and technological dependence on the US.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BBC News
2 hours ago
- BBC News
Why Donald Trump's tariffs take aim at Asia and your iPhones
When he began his trade war, President Donald Trump said his goal was to bring American jobs and manufacturing back to the US, reduce trade deficits and create a more level playing field for American companies competing globally. But after months of negotiations and many countries' refusal to meet America's demands, his strategy has taken a more punitive companies have been here before. Under Trump's first administration, when he imposed tariffs on Chinese exports, they scrambled to limit their exposure to Beijing, with many shifting production to Vietnam, Thailand and India to avoid higher levies. But his battery of new tariffs does not spare any of these economies. Stocks saw a sell-off, with benchmark indexes in Taiwan and South Korea in the red on Friday. Both countries are central to Asia's sprawling electronics production. The details are still hazy, but US firms from Apple to Nvidia will likely be paying more for their supply chains - they source critical components from several Asian countries and assemble devices in the they are on the hook - for iPhones, chips, batteries, and scores of other tiny components that power modern lives. It's not good news for Asian economies that have grown and become richer because of exports and foreign investment - from Japanese cars to South Korean electronics to Taiwanese chips. Soaring demand for all these goods fuelled trade surpluses with Washington over the years - and has driven President Trump's charge that Asian manufacturing has been taking American jobs away. In May, Trump told Apple CEO Tim Cook: "We put up with all the plants you built in China for years... we are not interested in you building in India, India can take care of themselves." Apple earns roughly half its revenue by selling iPhones that are manufactured in China, Vietnam and India. The tech giant reported bumper earnings for the three months to June, hours before Trump's tariff announcement on Thursday night, but now the future looks more executive Tim Cook told analysts on a conference call that tariffs had already cost Apple $800m (£600m) in the previous quarter, and may add $1.1bn in costs to the next quarter. Tech companies typically plan years ahead, but Trump's unpredictable tariff policy has paralysed businesses. Amazon's online marketplace, for instance, is just as dependent on China for what it sells in the US. But it's not yet clear what rates Chinese imports into the US could face because Beijing has yet to strike a deal with Washington - it has until 12 August to do so. Before they agreed to de-escalate, the two sides imposed tit-for-tat tariffs that reached a staggering 145% on some goods. But it's no longer just about China. On Thursday, Mr Cook said that most iPhones sold in the US now come from India. But Trump has just levelled a 25% tariff on Indian imports, after Delhi was unable to clinch a deal in time. Other firms chose to re-route their goods bound for the US through Vietnam and Thailand after the tariffs in Trump's first term. It became so common that it was called the "China+1" strategy. But this time, these trans-shipped goods are also being targeted. In fact, trans-shipping has been a big part of the US negotiations with Asian countries. Vietnamese imports face a 20% US levy but trans-shipped goods face 40%, according to Trump. It's harder still for advanced manufacturing like semiconductors - more than half of the world's chips, and most of its advanced ones, come from Taiwan. It is now subject to a 20% tariff. Chips are the backbone of Taiwan's economy, but also central to US efforts to gain a technological lead over China. So it is another US company, Nvidia, that will pay steep levies to put advanced chips by Taiwan's TSMC inside its AI products. But perhaps the biggest casualty of Trump's tariffs could well be Asia's e-commerce giants - as well as the American companies that rely on Chinese sellers and marketplaces. In a surprise move this week, Trump ditched the "de minimis" rule which exempted parcels under $800 from customs duties. He first did this in May, targeting such parcels from China and Hong Kong - and this was a blow for retailers like Shein and Temu, whose huge success has come from online sales in the West. Now American sites like eBay and Etsy have also lost that exemption - and the price of second-hand, vintage and handmade items for US customers will go up. President Trump says he is batting for Americans with these tariffs, but in a deeply globalised world, US firms and customers could also become casualties. There is still so much uncertainty that it is hard to see who the winners really are.
The Guardian
4 hours ago
- The Guardian
Deal or no deal? World leaders walk tightrope in tariff negotiations with Trump
It was grip-and-grin time for Ursula von der Leyen as she sat across from Donald Trump in Scotland last week, with the two announcing a deal for 15% tariffs on European imports that would avert a transatlantic trade war – but came at a stiff price for the 27-country bloc. After committing to a unilateral US raise on tariffs that came on the heels of a Nato commitment to increase defense spending to 5% of national GDPs, von der Leyen then thanked Trump 'for his personal commitment and his leadership to achieve this breakthrough'. 'He is a tough negotiator, but he is also a dealmaker,' she said, as the US president beamed. The EU was one of just a number of parties to strike a deal with Trump before his temporary pause on new tariffs came to an end this week. And like many others, the guiding principle for the EU appeared to be: it can always get worse. 'This is clearly the best deal we could get under very difficult circumstances,' Maroš Šefčovič, the EU trade chief, said. Others had a far bleaker interpretation of the dynamics, as Trump has wielded the threat of sky-high tariffs to cudgel his trading partners into submission. 'It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,' wrote the French prime minister, François Bayrou. Hungarian prime minister Viktor Orbán put it another way: 'It was Donald Trump eating Ursula von der Leyen for breakfast,' he said on his podcast. Later, he called her a 'featherweight'. World leaders have been forced to adopt a position of appeasement and pragmatism as they've approached the Trump administration, which has swung between imposing staggering tariffs on imports and then announcing last minute pauses and exclusions that suggest there is little rhyme or reason to the White House's tariff strategy. But the key factor for Trump appears to be taking whatever he can get. Countries across Asia exporting to the US were quickest to begin negotiating new trade deals with the White House. Vietnam was desperate to cut a 46% tariff imposed on the country, and Trump early last month announced that he had negotiated a 20% rate with Vietnamese negotiators. Except, it turned out, they believed that they had negotiated an 11% rate, Politico reported. And treasury secretary Scott Bessent this week admitted that he had never seen the deal, which the Vietnamese authorities have never confirmed. Trump reportedly used the trade threats along with other incentives in order to broker a recent peace between Thailand and Cambodia after fighting broke out along the border between the two countries. He soon announced a 19% rate – a significant cut from 49% for Cambodia and 36% for Thailand – which appeared more motivated by international politics than trade considerations. But while many countries in the region will breathe a sigh of relief as they avert sky-high tariffs, some see a new danger in the arbitrary redrawing of the US's trade relationship with the world. 'What we felt during this negotiation is that the US trade environment is fundamentally changing,' South Korean trade minister Yeo Han-koo said shortly after a deal was made to tariff imports at 15%, down from a threatened 25%. The two sides had made a verbally agreement but had not made a formal draft, he said, because the deal had to be struck so quickly. 'I think we are entering a new normal era,' he said. 'So, although we have overcome this crisis, we cannot be relieved, because we do not know when we will face pressure from tariffs or non-tariff measures again.' Leaders who have stood up to Trump are having the hardest time. Among others, Trump has focused his ire on Canada, which he has blamed for the fentanyl crisis in the US, a charge that Canada's prime minister Mark Carney has rejected. Trump on Friday announced that he would raise tariffs on Canada, a top trading partner, to 35%, as tough negotiations between the two sides continued. Carney, who had coined the elections slogan 'Elbows up, Canada' as a signal of defiance against Trump's tariff and annexation threats, said he was 'disappointed'. 'While we will continue to negotiate with the United States on our trading relationship, the Canadian government is laser focused on what we can control: building Canada strong,' Carney said.
Times
4 hours ago
- Times
Melrose defies tariffs and supply woes to beat profit forecast
A leading aerospace business's first-half profits were above forecasts in the face of disruption caused by President Trump's tariffs and long-running aerospace supply chain issues. Operating profits at Melrose, the owner of GKN Aerospace, were £310 million for the six months ended June 30, compared with a company-compiled analysts' consensus of £299 million. Revenue rose 6 per cent to £1.7 billion, driven by a particularly strong performance from Melrose's engines division, which supplies parts to the likes of Rolls-Royce and the US-based Pratt & Whitney. The performance sent shares up more than 5 per cent on a day that markets were backed into a retreat as Trump introduced a slew of fresh tariffs. Melrose was buoyed last week by news that the US-EU trade deal had granted a tariff exemption for aircraft and aviation parts, although it said on Friday it had successfully mitigated the 'direct impact' of the current levies on its half-year bottom line. The FTSE 100 group has a significant presence in the US, which makes up nearly two thirds of its sales, and it recently opened a multimillion-pound factory in San Diego. It does, however, run an operation in Mexico, which exports to both Europe and the United States. 'We delivered a strong performance in the first half with a 29 per cent improvement in profit and cashflow significantly stronger than last year despite the backdrop of supply chain and tariff disruptions,' Peter Dilnot, chief executive, said. • One-sided trade deal suggests outsider status has benefited Britain Melrose has benefited from a twin boom in defence and aviation. Conflict in Ukraine and the Middle East has led to governments increasing military spending budgets, while travel demand has soared in the post-pandemic era, leading to record order backlogs for new aircraft. It has, however, faced hurdles from wider supply chain issues affecting the aerospace industry, which have fuelled problems at the planemakers Boeing and Airbus. Those difficulties were further compounded by the additional complexity of Trump's trade levies. Dilnot said he was confident of delivering sustained increases in profit and cashflow in the years ahead and a £600 million free cashflow target by 2029. Melrose has managed to offset some of the impact from supply chain snarl-ups thanks to increasing demand for its aftermarket services, as companies look to get more life out of older aircraft. Dilnot said that despite lower growth forecasts for global air travel, 'constrained build rates' for new aircraft coupled with record order backlogs had forced airlines to make better use of their fleets, 'fuelling' aftermarket growth. • North Sea oil is a 'treasure chest' for the UK, says Donald Trump Operating profit at Melrose's engines division grew by more than a quarter to £261 million over the half-year period, alongside a 6 per cent rise in engine flying hours. Revenue increased 11 per cent to £781 million. Its structures division reported a near-third rise in operating profit to £63 million, with a strong 10 per cent revenue growth in defence. The company supplies parts for some of the largest defence programmes in the world, including Chinook helicopters and F-35 fighter jets. Recent contract awards include the extension of a six-year tie-up with BAE Systems to provide parts for its Eurofighter Typhoon jet, and a five-year deal with the US defence giant Lockheed Martin. Melrose's board has set an interim dividend of 2.4 pence per share for 2025, up 20 per cent year-on-year. The company is currently £91 million through a £250 million, 18-month, share buyback programme. Founded in 2003 by Christopher Miller, David Roper and Simon Peckham, Melrose floated on London's Aim market the same year. After rising to the FTSE 100, its market capitalisation now sits at about £6.87 billion.
