Stock markets fall as Trump threatens tariffs on EU, Apple
AFP | London
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Oil prices rebounded, meanwhile, having earlier dropped by around 1%
đč Investors were already on edge after Moodyâs stripped the United States of its top-tier credit ratings
đč Independent analysts warn Trumpâs tax package would increase the deficit by as much as $4 trillion over a decade
đč Trump threatens 25% tariff if iPhones not made in US
đč Trump fires new 50% tariff threat at EU, drawing stiff response
Stock markets fell back yesterday after US President Donald Trump ended a lull in his trade war with threats of massive tariffs on Apple products and imports from the European Union.
Wall Streetâs main indexes were all down around 1% two hours into trading, with the tech-heavy Nasdaq at one stage losing 1.5% before rallying, while Apple shares sank 2.5%.
Paris and Frankfurt ended with losses of around 1.5%, paring earlier losses, with shares in luxury and car companies taking a hit after Trump suggested he would hit the EU with 50% tariffs. Londonâs FTSE 100, which initially rose, also ended in the red.
Germanyâs DAX had been higher earlier in the day as German economic growth data was revised upward.
âWhat is somewhat of a surprise is the fact that the EU will now face a considerably higher tariff rate than China, an almost unthinkable scenario just a matter of weeks ago,â said Lindsay James, investment strategist at Quilter.
âIt is highlighting that much of this policy is designed to be punitive, rather than having any economic credibility to it.â
Oil prices rebounded, meanwhile, having earlier dropped by around 1%, while the dollar remained under pressure.
Trumpâs new threats revived investor concerns about his trade policies after a recent deal with Britain and a tariffs truce with China.
âAll the optimism over trade deals wiped out in minutes ââ seconds, even,â said Fawad Razaqzada, market analyst at StoneX.
Trump said on his Truth Social platform that he was ârecommending a straight 50% Tariff on the European Unionâ from June 1 as âdiscussions with them are going nowhere!â
âThe EU is one of Trumpâs least favourite regions, and he does not seem to have good relations with its leaders, which increases the chance of a prolonged trade war between the two,â said Kathleen Brooks, research director at trading platform XTB.
The US president had announced 20% tariffs on EU goods last month but suspended the measure to allow negotiations. However, he maintained a 10% levy on imports from the 27-nation bloc and nearly every other nation, along with 25% duties on cars, steel, and aluminium.
He also threatened on Friday to hit Apple with a 25% tariff if its iPhones are not manufactured in the United States.
âTrumpâs attack on Apple looks like one of his negotiating tactics to us,â Brooks said, noting that the threat comes as his tax-cut plan faces Senate debate after passing the House of Representatives.
Trumpâs social media outburst rocked stock markets, which had steadied after recent losses tied to concerns over ballooning US debt and rising borrowing costs.
Investors were already jittery after Moodyâs downgraded the United Statesâ credit rating and the House approved Trumpâs tax cut plan, which critics say would swell the national debt.
The yieldâor borrowing costâon 10-year and 30-year US government bonds surged this week amid fears about the fiscal health of the worldâs biggest economy. The yields eased late Thursday.
Trumpâs tax package, now headed to the Senate, has drawn scepticism from fiscal conservatives who warn the country is veering toward bankruptcy. Independent analysts estimate the plan would increase the deficit by as much as $4 trillion over a decade, though the White House insists it will spur economic growth of up to 5.2%âprojections far above mainstream consensus.
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