European markets set for heavy falls after Trump’s EU tariff warnings

Stock markets across Europe are expected to suffer hefty falls following big overnight declines in Asia after US President Donald Trump unveiled a raft of tariffs, sparking fears of a global trade war.

Experts are expecting stock indices to open sharply lower in Europe in volatile trading, with falls also forecast for Britain’s FTSE 100 Index, in response to warnings from Mr Trump over tariffs on imports from the European Union.

He also did not rule out imposing tariffs on UK goods, but reportedly said the situation “can be worked out”.

It follows moves over the weekend to slap harsh tariffs on Mexico, Canada and China, with the countries pledging to retaliate.

Asian markets were the first to open since the weekend tariff announcements, with Japan’s Nikkei slumping 2.8% and the Hang Seng in Hong Kong 1% lower, although mainland Chinese markets remain shut for the Chinese Lunar New Year holiday until Wednesday.

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Falls

Pre-market futures trading pointed to falls of more than 2% for France’s Cac 40 and the Dax in Germany, with experts predicting more muted falls of just nearly 1% for the FTSE 100 in the UK.

The pound edged lower against a strengthened US dollar, down 1% at just under 1.23 US dollars, but rose 0.4% to 1.20 euros as the single currency came under pressure.

Kathleen Brooks, research director at XTB, warned that stock markets “are likely to have a strong reaction” to Mr Trump’s initial wave of tariffs.

She said: “European stocks are expected to open sharply lower, and we expect the most severe declines for cyclical stocks and for the big exporters.”

She said the FTSE 100 may be shielded from the worst of the falls thanks to the hope of a deal with the US.

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'Resilient'

“Not only is the UK a defensive-style index, especially the FTSE 100, but it is not facing an immediate threat of tariffs; even so, the FTSE 100 is still pointing to a 0.8% decline at the start of this week.

“This does not mean that the UK economy will avoid impact from the tariffs, but it does mean that the UK economy could be more resilient than elsewhere.”

On the global outlook, she said: “It’s too early to know exactly what impact tariffs will have on the global economy, but it is fair to say that they have a high potential of triggering inflation, and weighing heavily on global growth, including the US economy.”