Trump's new tariffs shake markets as EU awaits trade deal letter

By Al Mayadeen English
Source: Reuters
11 Jul 2025 17:34

Global markets dipped as US President Donald Trump escalated his tariff campaign—targeting Canada and the EU—prompting EU preparations for retaliatory measures and deepening transatlantic tensions.

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A woman lifts a gold bar at the National Bank of Poland, the country's central bank, in Warsaw, Poland, Sunday, Nov. 13, 2022 (AP)

Reuters on Friday reported that global markets fell amid mounting investor concerns following US President Donald Trump's latest move to escalate his tariff campaign, this time targeting Canada and potentially the European Union. The developments triggered a retreat from risk assets and modest flows into traditional safe havens such as gold.

Trump issued a formal letter Thursday evening confirming that a 35% tariff on all imports from Canada would take effect on August 1, sending the Canadian dollar lower. A similar letter was expected to be delivered to the European Union by the end of Friday. Meanwhile, the president floated the idea of introducing a uniform 15% to 20% tariff on other trading partners, up from the existing 10%, while hitting countries like Brazil with unexpected levies as high as 50% on goods such as copper, pharmaceuticals, and semiconductors.

In anticipation of such moves, the European Union has been developing contingency plans. The bloc has prepared a retaliatory package worth up to €95 billion, targeting a broad range of US goods including machinery, electronics, wine, and vehicles. While European officials have paused implementation to leave room for diplomacy, that pause expires in mid-July. The EU is also set to deploy a new legal mechanism, the "anti-coercion instrument," which allows Brussels to impose swift countermeasures without requiring unanimous approval from all member states.

The transatlantic relationship has grown increasingly strained, not only due to trade tensions but also due to disagreements over defense spending and foreign policy direction. Washington's calls for Europe to increase military budgets have met resistance, while recent US diplomatic rhetoric, such as Vice President J.D. Vance's speech criticizing EU institutions, has deepened mistrust. In response, the EU has accelerated efforts toward "strategic autonomy," launching a €800 billion defense initiative aimed at reducing reliance on the US.

Despite the sweeping nature of the tariff threats, global markets showed limited immediate reaction. Europe's STOXX 600 index slipped 0.8%, while US futures for the S&P 500 and Nasdaq fell between 0.4% and 0.5%, signaling a likely pullback from recent record highs on Wall Street. The CBOE Volatility Index (VIX) remained subdued, hovering near its lowest levels since late February.

"The market is becoming a bit numb to these (tariff) announcements, and perhaps it's not until we see hard data showing an impact that we (will) start to see the market reacting," said City Index strategist Fiona Cincotta. "Obviously, we're getting more information through that does bring with it an element of clarity. Because there is so much uncertainty, there is still this idea that Trump could be open to negotiation, nothing feels 'final' still," she added.

Currencies Slide, Gold Climbs

In currency markets, the US dollar gained ground against its Canadian counterpart, which weakened to C$1.3697, down 0.2% on the day after earlier falling as much as 0.5%. The euro dipped 0.1% to $1.1694, marking nearly a 1% decline since the start of July. Meanwhile, the Japanese yen continued to lose value amid dimming hopes for a US-Japan trade accord, with the dollar rising 0.45% to 146.93 yen, set for its biggest weekly gain this year at 1.6%.

Safe haven gold rose for the third consecutive day, climbing 0.8% to $3,348 per ounce, bringing its July gains to 1.2%. Bitcoin also surged to a new record high of $118,832. US Treasuries saw less demand, with yields on 10-year notes rising 3.7 basis points to 4.384%, fueled by unexpectedly strong jobless claims data from the previous week.

In Europe, losses were led by bank and mining shares. The STOXX 600 closed 0.5% lower overall, with Germany's DAX slipping 0.6% and France's CAC 40 down 0.8%. Spain's IBEX lagged further, falling 1.5%. Basic resource stocks slid 1.4%, as copper and other metal prices came under pressure, while eurozone banks dropped 1.3%, with Spain's BBVA down 2.6%.

On the other hand, healthcare stocks helped cushion broader market losses. Major pharmaceutical firms like Novartis, Roche, and Novo Nordisk all posted gains. French luxury firms such as Pernod Ricard, Remy Cointreau, and LVMH pared earlier losses after reports indicated China would exempt major cognac producers from new brandy tariffs, provided they adhere to minimum price levels.