The Trump administration announced a plan to impose a 30% tariff on imported goods from the EU and Mexico starting August 1.
Many investors seem to have not fully assessed the serious impact of these tariff measures, leading to a rather mild European market reaction, in contrast to the strong fluctuations in April this year.
MAIN CONTENT
The new tariff announcement caused the European market to react more mildly compared to the previous round of tariffs.
The 'Trump Always Chickens Out' strategy leads investors to be complacent about the likelihood of high tariffs being enforced.
A 30% tariff could negatively affect economic growth in Europe and the U.S. market.
Why is the European market reaction fairly mild to the new 30% tax plan?
Although the announcement of a 30% tariff from Trump attracts attention, the European stock market only experienced a slight decline, a stark contrast to the deep drop in April when he announced a 20% tariff.
According to Michael Field, the European market strategist at Morningstar, investors believe that tariff threats are often just 'negotiation tactics' and do not become real policy, resulting in a low cautious reaction.
The market explosion in April shows that the tariff impact is truly significant, but recent signals suggest that investors are gradually downplaying the risks posed by the 'Trump Always Chickens Out' strategy.
Michael Field, Morningstar strategist, 7/2025
What is the 'Trump Always Chickens Out' strategy and how does it affect investors?
“TACO” is a term describing investors' belief that President Trump often backs down from tariff threats and does not implement them strongly.
Anthony Esposito, CEO of AscalonVI Capital, warns that the EU will not easily concede as Trump expects, which could turn tariff measures from mere threats into actual occurrences.
“The EU will not easily concede, negotiations will be tough, and the 30% tariff could very well be applied,”
Anthony Esposito, CEO AscalonVI Capital, 7/2025
How severely could a 30% tariff impact the European economy?
The 30% tariff far exceeds the 10% tariff imposed on the UK, potentially increasing import-export costs, slowing GDP growth, and having long-term impacts on the economies of European countries.
The surge in the European stock market in 2025, with the Stoxx 600 rising over 7%, the DAX in Germany up about 21%, and the FTSE MIB in Italy increasing by 17%, could be restrained or reversed if these high tariffs are implemented.
AJ Bell expert Dan Coatsworth notes that tariffs will reduce the growth momentum of European stock valuations, which have been driven by their attractiveness compared to other markets.
What are the reactions of experts and governments regarding the impact of tariffs on the United States and the EU?
Lars Klingbeil, German Minister of Finance, warns that a 30% tariff will not only harm Europe but also negatively affect the U.S. economy.
He calls for fair negotiations, emphasizing the importance of European sovereignty in the face of global trade conflicts and suggests that retaliatory measures should be implemented if an agreement is not reached.
He and French Minister Éric Lombard affirm European solidarity in protecting economic interests.
What measures and investment strategies should be considered in the context of tariff instability?
Anthony Esposito suggests focusing on defensive stock groups like finance, mining, and precious metals that could outperform in a rising tariff scenario.
Kevin Yin, Vice President of Investments at Asterozoa Capital, remarked that a sell-off of U.S. government bonds could occur, while precious metals and domestic industry stocks increase in value.
Investors need to be cautious with European stocks, especially export companies like automotive equipment manufacturing that could suffer significant damage.
Comparison table of some prominent European stock indices in 2025
Growth Index for 2025 (%) Expected impact when imposing a 30% tariff Stoxx 600 +7.2 Slowdown or decrease DAX (Germany) +21 Significant risk reduction due to large exports FTSE MIB (Italy) +17 Slowdown, heavily impacting exporting businesses
Frequently Asked Questions
Is the 30% tariff definitely going to be enforced?
Investors rely on the 'Trump Always Chickens Out' viewpoint, but many experts believe that the enforcement likelihood is high due to increasing political pressure.
How does the European market react to news of tariffs?
The current reaction is very different from April this year, this time the market only experienced a slight decline due to expectations of trade negotiations.
How do tariffs affect the U.S. economy?
According to Lars Klingbeil, tariffs not only affect the EU but also weaken the U.S. economy due to trade losses.
Which sectors could increase in value in this context?
Precious metals, finance, and mining are forecasted to outperform due to defensive demand in a tense tariff environment.
What retaliatory measures does the EU have if heavy tariffs are imposed?
The EU is ready to use trade retaliation measures to protect export interests and enhance economic sovereignty.
Source: https://tintucbitcoin.com/taco-token-giam-manh-vi-trump/
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