Trump Europe tariff plans add risk for investors

Last week President Donald Trump threatened to impose a 50% tariff on imports from the European Union (EU), effective 1 June 2025 and suggested a 25% tariff on Apple products sold in the US but not made in the US. This added uncertainty to trade negotiations and posed risks for investors. 

The announcement initially caused a temporary dip in stocks, as the 90-day pause was meant to give the participants time to conduct negotiations. However, markets stabilised after Trump rowed back, delaying the changes to 9 July this year.

Markets have calmed since the shock announcement for several reasons. One key factor is that this kind of rhetoric from Trump has become less surprising, as we've seen similar tactics before. Trump's announcement is now viewed as a negotiation strategy, much like his approach with China. Encouragingly, we’ve seen developments to suggest that trade disagreements are broadly on their way to a resolution and US courts have ruled that Trump's "Liberation Day" tariff scheme is illegal. 

In mid-May, Trump announced a "total reset" in relations with China, which included reducing US tariffs on Chinese imports from 145% to 30%. In response, China cut its retaliatory tariffs on US imports from 125% to 10%.

The latest tariff announcement on the EU likely stems from Trump's dissatisfaction with the current trade deal and negotiations. While his exact terms are unclear, the tariffs could remain until he achieves what he considers a ‘good outcome’. However, history suggests that a standoff followed by de-escalation is more likely. 

Ultimately, while the tariffs may not be implemented, the threat alone creates market volatility. As the new deadline looms, certain sectors will be more affected than others. However, the element of surprise in Trump's tactics is diminishing, as many realise that high tariffs are not in anyone's interest. One need only look at recent developments, which include a reduction in US tariffs on Chinese imports and new trade deals with the UK and India, to see that most will see reason and sign a fairer agreement.  

It can be jarring to see the market react so negatively upon such news. With a single social media post Trump interrupted the de-escalation rally in stock markets that began in April after a 90-day pause was announced. As volatility is likely to continue, one of the best things you can do is to remain diversified and avoid making hasty decisions. It’s important to bear in mind that staying invested does come with risks as investments can go down as well as up and you may get back less than you invested. 

Market volatility is expected to continue until trade negotiations are resolved. In the meantime, you should be cautious but not make rash decisions, as markets have previously rebounded from such announcements. Short-term market fluctuations shouldn't deter you from pursuing your long-term financial goals. However, if you're uncertain about your future or facing significant life changes like divorce, moving home, or having a baby, it's wise to consult your regular Evelyn Partners contact to ensure you're on track and able to meet your financial obligations.

While Trump's tariff threats add an element of risk, it’s important to remember that the market's reaction to these types of situations is often temporary. It’s usually wise to stay invested and diversified to navigate these uncertainties. Book an appointment to speak to an Evelyn Partners expert to explore your options and to ensure that your life changes will not turn you into a forced seller in volatile times.