European equity indices surged higher Thursday after U.S. President Donald Trump announced a 90-day pause on most new U.S. tariffs, but the declaration of a significant increase in duties on Chinese goods has ramped up uncertainty over the global economy.
At 03:05 ET (07:05 GMT), the DAX index in Germany soared 7.9%, the CAC 40 in France gained 1.8% and the FTSE 100 in the U.K. rose 5.7%.
The main European indices have followed their Asian counterparts in a relief rally, with the Wall Street indexes logging their largest daily percentage gains in more than a decade after Trump late Wednesday announced a pause on reciprocal tariffs for most U.S. trading partners.
However, at the same time, Trump raised tariffs on Chinese imports to 125% from 104%, further raising trade tensions between the world’s two largest economies.
Additionally, the 10% blanket duty on almost all U.S. imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminium that are already in place.
“As such caution remains warranted – and remember President Trump does need revenue to fund his promised tax cuts. It would be a surprise if tonight’s announcement was really the return of ‘common sense’,” ING analysts said in a note.
European Commission President Ursula von der Leyen on Thursday welcomed Trump’s announcement of a pause in reciprocal tariffs.
She added that tariffs are taxes that only hurt businesses and consumers.
“That’s why I’ve consistently advocated for a zero-for-zero tariff agreement between the European Union and the United States,” she said in a statement on X.
European Union member states voted on Wednesday in favor of a proposal from the bloc’s executive arm to introduce new trade countermeasures against the United States.
There is not much major economic news on the slate in Europe Thursday, and attention will quickly turn to the release of the March report on U.S. inflation later in the session.
However, it’s debatable how much significance the markets will place on this report given the numbers mostly predate the latest round of hefty levies imposed by Trump.
In the corporate sector, Volkswagen (ETR:VOWG_p) will be in the spotlight after the German auto giant reported late Wednesday disappointing first-quarter results, citing the uncertainty caused by the U.S. tariffs for the shortfall.
The automaker has halted rail shipments of vehicles from Mexico as a result of uncertainty surrounding Trump’s tariffs and is holding at port cars arriving from Europe.
That said, the group’s sales of battery-electric cars more than doubled in Europe in the first quarter but fell by over a third in China, in a sign of the automaker’s diverging fortunes in the electric car market.
Oil prices fell Thursday on concerns over the escalating trade war between the U.S. and China, the two largest economies in the world, even as President Trump announced a 90-day pause on tariffs aimed at other countries.
At 03:05 ET, Brent futures dropped 0.5% to $65.14 a barrel. U.S. West Texas Intermediate crude futures fell 0.4% to $62.12 a barrel.
The benchmark crude contracts had settled 4% higher on Wednesday, following the announcement of a tariff pause for most countries, after dropping as much as 7% during the session.
However, the higher U.S. tariffs on China still leave plenty of uncertainty in the markets, particularly as China is the largest crude importer in the world, and this is still likely to drag on global growth, and thus demand for crude.
