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European markets slipped on Friday, capping off a turbulent week dominated by U.S. tariff policy swings and growing anxiety over the economic fallout of the escalating U.S.-China trade war.
At 07:58 GMT, the pan-European STOXX 600 index edged 0.3% lower, retreating from early gains. The index remains close to a 1.5-year low after U.S. President Donald Trump first imposed, then partially rolled back, sweeping tariffs—moves that sent shockwaves through global markets.
China Tariff Hike Dampens Sentiment
Friday’s early optimism faded after China announced a tariff hike on U.S. goods to 125%, in response to Trump’s earlier decision to increase tariffs on Chinese imports to 145%. The 90-day tariff suspension Trump granted to other countries explicitly excluded China, further intensifying the standoff between the two economic powerhouses.
“The 90-day pause is only a temporary window, and a fragile one at that,” said Nick Saunders, CEO at Webull UK. “Many countries are now lining up to strike trade deals, and not all will get what they want.”
Regional Markets Mixed; Germany Pulls Back After Big Rally
Across Europe, markets showed mixed performance:
- Germany’s DAX fell 0.2%, following its strongest one-day gain since 2022 on Thursday.
- Other regional indexes were flat to slightly lower, reflecting cautious sentiment heading into the weekend.
The EU has so far held off on launching retaliatory tariffs of its own, with finance ministers meeting Friday to consider options. The decision hinges on whether Washington’s 90-day tariff delay can open meaningful trade negotiations.
French President Emmanuel Macron called the pause “a fragile one,” reflecting widespread skepticism about Trump’s long-term trade intentions.
ECB in Focus as Market Risks Rise
Adding to the uncertainty, the European Central Bank is monitoring the risk of financial contagion. ECB supervisor Sharon Donnery expressed concern that market stress could spread from non-bank financial entities—such as hedge funds—to traditional lenders, especially in turbulent periods like the current one.
All eyes now turn to the ECB policy meeting next Thursday, where money markets are pricing in a near-certain 25 basis point rate cut, amid signs of weakening growth and intensifying geopolitical headwinds.
Stock Highlights: Hexagon Plunges on Profit Miss
In corporate news, shares of Swedish industrial tech firm Hexagon dropped 9.6% after the company reported an 8% decline in adjusted Q1 operating profit. The disappointing results raised concerns about industrial demand trends, particularly in the context of weakening global trade activity.
Outlook
With the trade war between the U.S. and China escalating and Europe’s role in global negotiations still unclear, market volatility is likely to remain high. Investors will be closely watching developments out of Washington and Beijing, as well as next week’s ECB meeting, for any signals on policy responses to growing macroeconomic risks.
