FRANKFURT: European shares tumbled further on Wednesday as China more than doubled its tariffs on US imports, with healthcare stocks leading declines after US President Donald Trump threatened more sector-specific tariffs.
The pan-European STOXX 600 slumped 3.5%, as the previous session’s rally fizzled out.
The healthcare sector fell 5.8% to its lowest level since October 2022 after Trump reiterated plans for a “major” tariff on all pharmaceutical imports. Pharma giants Roche , Novartis, Novo Nordisk and AstraZeneca all dropped between 6.9% and 5.8%
China will impose 84% tariffs on US goods from Thursday, up from the 34% previously announced, its finance ministry said, after Trump’s 104% tariffs on Chinese imports took effect on Wednesday.
The trade war absorbed most of investors’ attention, with the market little moved by news that German conservatives had clinched a coalition deal with the centre-left Social Democrats (SPD) after weeks of haggling, and by their outlining a raft of policies designed to revive stalled economic growth.
The tit-for-tat tariffs unleashed a fresh wave of selling on global markets, with investors exiting safe haven
US bonds amid fears that the trade war will severely hit economic growth and also stoke up inflation.
“There hasn’t been any significant progress in terms of negotiations between the US and the countries that have been hit by these reciprocal tariffs… In our view, there’s no way China can back down,” said Andrea Cicione, head of research at TS Lombard.
“We might get some relief if some of these negotiations yield some success… but until that happens it’s difficult to turn much more constructive as the risk of recession is going up.”
“The negative impact from a (potential) US recession would definitely trump, in the near term, any benefits from increased (German) fiscal spending, Cicione said.
German stocks fell 3%. The STOXX 600 is currently more than 16% below its March all-time closing high, nearing the 20% threshold that would confirm a bear market.
The European Union also said it would impose 25% tariffs on a range of US imports in a first round of countermeasures, after the United States’ country-specific levies also went into effect.
Rate-sensitive banks slumped 3.1% as traders fully priced in an interest rate cut from the European Central Bank next week to shore up the deteriorating economy.
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