The U.S. President threatens to impose a 50% tariff on goods from the European Union, citing a lack of progress in ongoing trade negotiations.
"Their powerful trade barriers, VAT, absurd corporate fines, non-monetary trade barriers, currency manipulation, unfair and unfounded lawsuits against American companies, and much more have led to a trade deficit with the U.S. of over $250,000,000 a year — a figure that is completely unacceptable," he wrote on May 23 on the social network Truth Social.
"Our negotiations with them are at an impasse!" Trump stated.
"Therefore, I recommend a direct 50% tariff on the European Union, starting June 1, 2025."
Response from the European Commission and markets
Olof Gill, a representative of the European Commission, declined to comment immediately on the situation, stating that he expects the conversation between European Trade Commissioner Maroš Šefčovič and U.S. Trade Representative Jamieson Greer to conclude. Gill did not specify when this call would take place.
Three major European stock indices fell sharply following Trump's post: the German DAX and French CAC dropped by 2.6% and 2.8% respectively. The London FTSE index lost 1.3%. American futures also plummeted — Dow futures fell by more than 600 points, or 1.7%. Bitcoin dropped by 3.6%.
1-hour chart of BTC/USDT. Source: cryptocurrency screener Cryptovizor
Escalation of trade demands
The tariff that Trump is considering is more than double the size of the initial 'reciprocal' tariff of 20% that was in place briefly in April before he quickly suspended these measures to continue negotiations.
The pause is set to expire on July 9. Since the suspension, the only trade deal announced has been with the United Kingdom.
The threat from the U.S. President to impose such significant trade restrictions reflects his tough stance in relations with European partners. Trump criticizes the existing trade imbalance and demands fairer conditions for American businesses.
The market reaction showed the seriousness of the perception by investors of the American leader's statements. The drop in European indices, American futures, and Bitcoin demonstrates market participants' concerns about a potential trade war between the U.S. and the EU.