On April 1, 2025
European stock markets recorded their first negative monthly performance of 2025, with uncertainties surrounding US President Donald Trump’s upcoming reciprocal tariffs weighing heavily on market sentiment.
In March, the European stock indices posted their first decline this year as investors anticipated the announcement of 25% import levies on automobiles and other tariffs. On the final trading day of March, the pan-European Stoxx 600 dropped 1.51%, the DAX fell 1.33%, and the CAC 40 slid 1.58%. Over the course of the month, these major indices lost 3.8%, 2.38%, and 4.09%, respectively.
Despite this setback, European equities have outperformed their US counterparts in 2025. Wall Street saw its sharpest monthly decline since December 2022, driven by concerns over the potential economic consequences of expanding tariffs.
Trump to Unveil Reciprocal Tariffs on “Liberation Day”
President Trump is set to announce reciprocal tariffs on Wednesday, declaring it as America’s “Liberation Day.” The new tariffs will target “all countries,” with no exemptions, according to White House Press Secretary Karoline Leavitt. She confirmed that the tariffs would be “country-based” and were designed to address unfair trade practices that have long affected the U.S. Trump suggested that the European Union, Japan, India, and Canada would likely face new tariffs, citing their higher import duties on U.S. goods. Additionally, 25% tariffs on automobiles will take effect the same day.
Trump also hinted at future tariffs on medical products, lumber, semiconductors, and copper, following an executive order signed in February to investigate copper imports due to national security and economic concerns. In March, the president imposed 25% tariffs on steel and aluminum, continuing his aggressive trade policy, particularly with Mexico, Canada, and China.
European Consumer Stocks Lead Losses Amid Tariff Fears
Trump’s expanding tariff agenda is expected to heavily impact several European sectors, especially luxury goods, automobiles, and healthcare. In March, consumer cyclical stocks were the worst performers in the Stoxx 600 index, falling 12%, driven by declines in luxury and automotive shares. LVMH and Hermès saw steep drops of 18% and 12%, respectively. The automotive sector also faced significant losses, with major companies like Mercedes-Benz (-9.3%), Volkswagen (-10%), BMW (-12%), and Stellantis (-17%) suffering due to the tariff uncertainty.
Healthcare and technology stocks also saw sharp declines, particularly as Trump threatened tariffs on medical products and semiconductor chips. Novo Nordisk shares plummeted 27% in March, marking their worst performance since 2022, partly due to disappointing drug trial results and tariff concerns. European tech giants SAP and ASML also saw notable losses, dropping 7.9% and 10.7%, respectively.
Euro Sees Strongest Monthly Gain Since 2022
On the flip side, the euro had its strongest monthly gain against the US dollar since November 2022. The EUR/USD pair surged by 4.25% in March, climbing from 1.04 to 1.08. The euro’s rally was fueled by optimism surrounding the European Union’s fiscal plans, such as increased defense spending and Germany’s debt reform initiatives.
Meanwhile, the US dollar weakened amid growing concerns that Trump’s tariffs could stifle economic growth. Diverging government bond yields also reflected shifting market sentiment. Germany’s 10-year bund yield rose by 29 basis points to 2.73%, while the US 10-year Treasury yield remained flat at a three-month low of 4.21%. Investors sought the safety of US government bonds amidst rising recession fears, while European bonds saw sell-offs, pushing yields higher due to anticipated increases in debt issuance.
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