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European equity markets surged on Thursday, joining a global relief rally after U.S. President Donald Trump announced a 90-day delay on most of his planned reciprocal tariffs. However, sentiment remained cautious as Trump simultaneously hiked duties on Chinese imports to 125%, signaling continued tension between the world’s two largest economies.
As of 03:05 ET (07:05 GMT):
- Germany’s DAX jumped 7.9%
- France’s CAC 40 rose 1.8%
- The U.K.’s FTSE 100 climbed 5.7%
Relief Rally Gathers Pace, But Risks Linger
The gains in Europe followed strong overnight rallies in Asia and Wall Street, with U.S. indices posting their biggest daily percentage gains in over a decade after Trump’s late-Wednesday announcement to postpone new tariffs for most trading partners.
Still, the optimism was tempered by the decision to increase tariffs on Chinese goods from 104% to 125%, further escalating an already tense trade standoff. Additionally, Trump confirmed that:
- The 10% blanket tariff on nearly all U.S. imports remains intact
- Existing duties on autos, steel, and aluminum are unaffected by the pause
These developments have kept markets on edge about long-term global growth prospects, especially as the U.S.-China tariff war intensifies.
EU Responds: Welcome Pause, But Prepares Countermeasures
European Commission President Ursula von der Leyen welcomed Trump’s decision to delay new tariffs for most allies, reiterating that tariffs ultimately harm businesses and consumers.
Nevertheless, the European Union is preparing its own countermeasures. On Wednesday, member states voted in favor of a proposal to introduce retaliatory trade actions against the United States, highlighting the fragility of transatlantic trade relations despite the temporary truce.
U.S. CPI in Focus, But May Be Overshadowed
Investors are also awaiting the release of U.S. Consumer Price Index (CPI) data for March later in the day. However, analysts suggest its impact may be muted, as the figures predate the latest wave of tariffs and may not fully reflect inflationary pressures stemming from the new trade measures.
Volkswagen Highlights Tariff Fallout
In corporate news, Volkswagen (ETR:VOWG_p) came under pressure after reporting weaker-than-expected Q1 results. The automaker cited uncertainty from U.S. tariffs as a key driver of the shortfall and announced:
- Halts to rail shipments from Mexico
- Delays at ports for Europe-bound vehicles
Despite the challenges, VW reported that its electric vehicle (EV) sales more than doubled in Europe, while China EV sales dropped over 33%, reflecting the growing divergence between its Western and Asian markets.
Outlook: Relief May Be Short-Lived
While Thursday’s rally underscores the market’s relief over the temporary tariff reprieve, the underlying risks—particularly the escalating U.S.-China conflict—remain unresolved. Unless both sides move toward genuine negotiation, the threat of prolonged supply chain disruptions and slower global growth may keep markets volatile in the weeks ahead.
