Europe midday: Stoxx slumps on Trump's trade war, Ukraine spat

(Sharecast News) - European markets slumped on Tuesday as the US went ahead with tariffs on China and Mexico, which in turn retaliated with levies of their own, while President Donald Trump ratcheted up geopolitical tensions by suspending all aid to Ukraine. The pan-regional Stoxx 600 index was down by 1.30% at 555.86, following sharp falls on wall Street and Asia driven by worries about the economic impact of a trade war.

Trump imposed his tariffs overnight and then cut off assistance to Ukraine, continuing his strong-arm tactics against the war-ravaged nation in an effort to force it to sign a deal on minerals and extract a peace deal on Washington and Moscow's terms.

"The spectre of a full-blown trade war is once again looming, threatening to choke global economic growth just as investors were starting to regain confidence. The stakes just got higher, and China isn't sitting idly by," said SPI Asset Management's Stephen Innes.

"Defence and infrastructure spending is setting the tone for a European revival, while Washington is left debating whether it's about to stumble into a self-inflicted 'Trumpcession'."

"Wall Street is now staring down a worsening cocktail of Trump's tariff fury, stretched equity valuations, and the cold, hard realization that the U.S. economy may be losing steam. Meanwhile, across the pond, Europe-long the ugly duckling of global markets-is suddenly the belle of the ball."

Auto stocks were hammered as Trump waged a war of his own on trading partners. Canada and Mexico - America's biggest trading partners - will be slapped with tariffs of 25%, while levies against China will be doubled to 20%.

China announced Tuesday it will impose additional tariffs of up to 15% from March 10 on imports of key U.S. farm products, including chicken, pork, soy and beef, and also expanded controls on doing business with US firms.

Canadian Prime Minister Justin Trudeau responded with an immediate 25% tariff on CAN $30bn worth of US imports. He had warned previously that American beer, wine, bourbon, home appliances and Florida orange juice would be targeted.

Tariffs will be placed on another CAN $125bn of US goods if US levies were still in place in 21 days.



Shares in auto makers and industry suppliers - vulnerable to shifts in tariffs - were all hit by the news, with Stellantis, Mercedes Benz, Continental, Valeo, Daimler Truck and BMW lower.

Posh clothing and handbag with big exposure to China, such as Hermes, LVMH and Kering were also down.

Meanwhile, weapons manufacturers were in vogue on the prospect of higher defence spending by European nations. French defence firm Thales was also boosted by higher earnings and revenue last year.

Germany peers Rheinmetall, Hensoldt and Renk gained, while Britain's BAE Systems was also higher.

"The ramp up in European military defence spending had been seen as a precursor to maintaining support from the US as all sides work towards a lasting peace solution," said MarketScope analyst Joshua Mahony.

"However, with Trump both withdrawing support for Ukraine and seeking to lessen the sanctions on Russia, it is clear that the US has sought to tip the scales away from their allies and in favour of their perceived enemy."

"For Europe, there will an increased desire to find a peaceful solution, as this conflict will become increasingly expensive as they make up for any shortfall in the absence of the US. However, it will be very clear that any agreement forms the basis of future expectations in Russia should they seek to expand their borders once again in the future."

Reporting by Frank Prenesti for Sharecast.com