(Bloomberg) — Stocks in Europe retreated on concern the region could be next to face US tariffs after President Donald Trump imposed levies on Mexico, Canada and China.
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The Stoxx 600 slumped 1.1%, weighed down by automakers and energy stocks, after closing at a record in the previous session. S&P 500 futures pointed to a flat open. Chinese stocks edged higher, meanwhile, on speculation the country is taking a measured approach with its retaliatory tariffs, stopping short of a full-blown trade war.
The new levies mark Trump’s biggest push to remake global trade, and investors will be watching his address to Congress Tuesday for hints on future steps. Canada announced a sweeping package of tariffs in response to the US moves and China retaliated by imposing tariffs as high as 15% on some US exports.
“We need to know exactly what the US plan is towards European tariffs,” said Salman Ahmed, global head of macro and strategic asset allocation from Fidelity International. “It’s likely to be different from Canadian and Mexican tariffs, because the interrelationships are different. It’s a big unknown for European equity outperformance to continue.”
Treasuries were steady, while the Bloomberg Dollar Spot Index ticked lower. The Mexican peso fell 0.9% against the greenback, while the Canadian dollar was slightly stronger after retreating for seven straight sessions.
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Trump also said Monday that the US would impose tariffs on “external” agricultural products starting on April 2, adding another layer of threats to impose trade barriers on imported goods. He didn’t detail which products would be affected, or if there would be any exceptions.
In Asia, investors are focusing on the National People’s Congress meeting, which starts in Beijing Wednesday, amid expectations China will spell out measures to stimulate the economy. The annual session will run till March 11.
“China’s hit back isn’t exactly aggressive,” said Billy Leung, an investment strategist at Global X ETFs in Sydney. That level of tariffs on “US agricultural goods, but nothing broad-based on tech or autos, suggests to me they’re leaving room for negotiation rather than going full tit-for-tat,” he said.
Ukraine Pressure
Trump also ordered a pause to all military aid to Ukraine, turning up the heat on Volodymyr Zelenskiy just days after an Oval Office blowup with the Ukrainian president left the support of his country’s most important ally in doubt.
European defense stocks bucked the broader slump after the European Union proposed extending €150 billion ($158 billion) in loans to boost military spending as Trump pulls back American security on the continent.
EU Proposes €150 Billion in Loans for Pan-European Defense
Cryptocurrencies remained volatile after Trump stepped up calls for a digital-asset stockpile. Bitcoin declined for a second day after sinking more than 9% on Monday. The MVIS CryptoCompare Digital Assets 100 Index slipped as much as 9.8%.
In commodities, oil extended losses from the lowest in almost three months as OPEC+ said it will proceed with plans to revive halted production. Gold prices climbed.
Key events this week:
Eurozone unemployment, Tuesday
President Donald Trump’s speech to a joint session of Congress, Tuesday
China Caixin services PMI, Wednesday
Eurozone HCOB services PMI, PPI, Wednesday
US ADP employment, ISM services index, factory orders, Wednesday
