European stocks fell sharply on Tuesday as markets reacted to President Donald Trump’s escalating trade threats targeting key European nations. By mid-morning London time, the Stoxx Europe 600 index had dropped 1.4%, with major bourses including France’s CAC 40, Germany’s DAX, and the U.K.’s FTSE 100 all registering losses. Analysts attribute the slump to growing uncertainty over tariffs and potential retaliation.
The downturn comes after Trump announced last weekend that eight European allies could face rising tariffs, starting at 10% on February 1 and increasing to 25% by June 1, unless a deal is reached over Greenland. The tariffs would target Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands, and Finland, heightening tensions in already strained trade relations between the U.S. and the EU.
Tuesday’s headlines added further pressure when Trump threatened a 200% tariff on French wine and champagne, citing France’s refusal to join his “Board of Peace” on Gaza. The announcement hit shares of French luxury drink makers, with LVMH — owner of Moët & Chandon, Dom Pérignon, and Veuve Clicquot — falling 2.1%, while Remy Cointreau lost 1.5% in Paris trading. Investors fear that targeted tariffs on iconic European beverages could disrupt global supply chains and consumer demand.
In the currency markets, the euro strengthened slightly against both the dollar and pound, trading at $1.1725 and 0.87 euros, respectively. Sterling also rose to $1.3471 versus the U.S. dollar. Meanwhile, UK economic data showed a steady unemployment rate of 5.1% and slower wage growth at 4.5%, offering some relief amid broader European market uncertainty.
European leaders have condemned Trump’s tariff threats as “unacceptable,” with France reportedly pushing the EU to deploy its “Anti-Coercion Instrument” to counteract the measures. All eyes now turn to the World Economic Forum in Davos, where leaders including Emmanuel Macron, Ursula von der Leyen, and He Lifeng will speak, and where Trump is scheduled to deliver remarks on Wednesday. Analysts predict that discussions at Davos could set the tone for transatlantic trade relations in the coming months.
source: cnbc