President Donald Trump's threat to impose a sweeping 50% tariff on all European Union imports starting June 1 sparked a broad selloff across European markets Friday, triggering fears of a transatlantic trade war just as global growth faces renewed pressure.
In a post on Truth Social, Trump said the EU's "powerful Trade Barriers, VAT Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against American Companies" were to blame for an annual trade deficit exceeding $250 billion, which he called "totally unacceptable."
The proposed tariff would exempt goods manufactured in the United States, potentially creating sharp distortions for EU-based exporters and global supply chains.
European Benchmarks Tumble
The fallout was immediate in markets. The Euro STOXX 50 index - as closely tracked by the iShares MSCI Eurozone ETF (NYSE: EZU) - dropped 3%, Italy's FTSE MIB sank 2.9%, France's CAC 40 lost 2.6% and Spain's IBEX 35 fell 2.2%.
Germany's DAX, as tracked by the iShares MSCI Germany Index Fund (NYSE: EWG), which is home to many export-heavy firms, slid 2.3%.
Financial stocks bore the brunt of the decline, with Deutsche Bank AG DB falling 6.1%, Société Générale SA (OTC: SCGLY) down 5.3% and Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA) sliding 5%.
Industrial and luxury exporters also came under heavy pressure, including Bayerische Motoren Werke AG (OTC: BMWYY), or BMW (−4.5%), UniCredit SpA (OTC: UNCRY) (−4.5%) and EssilorLuxottica SA (OTC: ESLOY) (−4.2%).
Export Exposure To US Trade Is Key
The tariff threat has placed a spotlight on European companies heavily reliant on U.S. revenues.
In Germany, Adidas AG (OTC: ADDYY) derives roughly a third of its revenue from the United States, while SAP SE (NYSE: SAP) generates about 40% of its turnover from North America.
Chipmaker Infineon Technologies AG (OTC: IFNNY) is also significantly exposed due to its automotive and electronics customers.
French luxury and tech firms are equally at risk. LVMH Moët Hennessy Louis Vuitton SE (OTC: LVMUY) earns close to 25% of its revenue in the U.S., while Dassault Systèmes SE (OTC: DASTY) has a strong footprint in North American enterprise software. Hermès International SA (OTC: HESAY) pulls about 20-25% of its sales from the American market.
Italian brands like Ferrari NV (NYSE: RACE), with over 30% of sales from the U.S., and EssilorLuxottica SA (OTC: ESLOY), which owns Oakley and Ray-Ban, are also vulnerable.
In the Netherlands, tech heavyweight ASML Holding NV (NASDAQ: ASML) earns about 20-25% of revenue from the U.S., and Koninklijke Philips NV (NYSE: PHG) maintains a major healthcare business across North America.
EU Retaliation Risk Grows For US Stocks
For U.S. corporations with heavy exposure to Europe-particularly in tech, autos, agriculture and aviation-the economic consequences could be significant if the European Union responds in kind.
The 2018 EU countermeasures to Trump's steel tariffs included duties on motorcycles, bourbon and orange juice-strategic hits on U.S. swing-state exports.
EU officials may also revisit tech taxation disputes, where U.S. firms like Apple Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) and Microsoft Corp. (NASDAQ: MSFT) are already under regulatory scrutiny.