Erratic U.S. Tariff Policy Shakes Confidence In Europe’s Bull Run

Investors are reconsidering the recent rally in European stocks and the euro after a strong first quarter, fearing that expectations for a public spending boom may have overstated its ability to revive the region’s sluggish economy and shield it from trade war risks, Naomi Rovnick and Yoruk Bahceli wrote in an analysis for Reuters.

Trump's tariffs are rattling global markets. I Photo: Guy Delsaut Wikimedia Commons

Major asset managers, including Amundi—Europe’s largest—said they had either held back on or reduced their bets on the euro and trimmed their bullish European equity positions as U.S. President Donald Trump prepared to announce reciprocal trade tariffs on April 2.

Many analysts believe that the so-called “Europhoria” trade, which drove German stocks to their best quarter since 2022 and pushed the euro to a five-month high earlier in March, had already factored in most foreseeable economic stimulus gains.

"If the Trump administration pushes trade partners toward a trade war, it will be bearish for European equities," said Edmond de Rothschild Asset Management CIO Benjamin Melman, adding that he did not expect substantial gains for European stocks moving forward.

Global markets have been continually rattled after Trump announced a 25% tariff on car imports, causing European equities to drop as much as 2% and wiping billions of euros off German automakers’ stock value.

Pictet Asset Management's chief strategist, Luca Paolini, warned that additional negative news on tariffs could hit European assets—currently buoyed by stimulus hopes—harder than U.S. markets, which have already been dampened by the White House’s unpredictable trade policies.