Stock markets have dropped sharply after US president Donald Trump reignited fears of a trade war by threatening to impose high tariffs on the EU and smartphone giant Apple.
European shares fell 1.7 per cent, the US S&P 500 fell 1.1 per cent in early trading and the tech-heavy Nasdaq fell 1.6 per cent. The Dow Jones Industrial Average fell 408 points, or 1 per cent.
Mr Trump threatened to impose a 50 per cent tax from next month on all imports to the US from the EU, including on pharmaceuticals and luxury items.
He also warned Apple and Samsung of a 25 per cent tariff on any iPhones manufactured outside the United States but sold there.
“This latest threat is worse than the worst-case scenario,” said Fiona Cincotta, senior market analyst at City Index.
US Treasury secretary Scott Bessent said Mr Trump did not believe EU trade offers to the US were good enough and that he hoped the new tariff threat would “light a fire” under officials in talks with Washington.
In response to Mr Trump’s remarks, the EU trade chief Maros Sefcovic said the bloc is committed to securing a trade deal with the US based on "respect", not "threats".
"The EU Commission remains ready to work in good faith. EU-US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests," the European commissioner for trade and economic security wrote in a post on X.
Spoke w @jamiesongreer & @howardlutnick. The EU's fully engaged, committed to securing a deal that works for both. @EU_Commission remains ready to work in good faith. EU-US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests. pic.twitter.com/RfIo5K4aus
— Maroš Šefčovič🇪🇺 (@MarosSefcovic) May 23, 2025
In early April, Mr Trump unveiled high tariffs on nearly every country, with a minimum of 10 per cent, bringing the world to the brink of a trade war, although he later announced a 90-day suspension.
In response to the tariffs on China, Apple has been looking to move iPhone manufacturing to India.
The pan-European STOXX 600 index fell 1.9 per cent by early afternoon on Friday, and closed down 0.93 per cent to record a weekly fall for the first time in five weeks.
The Euro STOXX Volatility index spiked to its highest in more than four weeks.
Stock indexes in France, Spain and Italy were down between 2.3 per cent and 2.8 per cent.
The UK’s blue-chip FTSE-100 was down by 0.6 per cent after recovering slightly from a steeper drop.
The German DAX fell 2.1 per cent, after rising close to an all-time high earlier in the day, on economic news.
Shares in German carmakers and luxury companies, some of the most exposed to tariffs, fell. Porsche (3.93 per cent), Mercedes (3.99 per cent) and BMW (3.71 per cent) all finished down on the news.
Government bonds in the US and Europe rallied, however, as the assets suddenly found favour with haven buyers.
The US president claimed on his Truth Social network: “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with.”
He announced that Apple would be hit with 25 per cent tariffs if phones sold in the US were not made there, sending the iPhone maker’s shares down almost 4 per cent in pre-market trading, later adding that it would also apply to other foreign phone companies.
A source close to Mr Trump said that he had been surprised at how the EU “just dug in” and refused to negotiate in the same way the UK did. He was said to be annoyed by the threats of counter tariffs from Brussels.
The EU Commission declined to comment, saying it would wait for a phone call between EU trade chief Maros Sefcovic and his US counterpart Jamieson Greer later.
Netherlands prime minister Dick Schoof said he expected a calm and robust response from the EU.
While the UK is only faced with tariffs of 10 per cent, a leading trade expert warned of potentially dire consequences in Britain, too.
Marco Forgione, director general of the Chartered Institute of Exports and International Trade, said: “There is a considerable risk that in the short term, the UK could be caught up in the tit-for-tat tariff exchange, in particular the effect on Northern Ireland.”
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