The European Union is bracing for potential 20% tariffs from the Trump administration as the April 2 deadline for “reciprocal” trade measures looms.
The Financial Times reported Wednesday that Maroš Šefčovič, the European Commissioner for Trade and Economic Security, warned that the U.S. may slap 20% tariffs on European Union products starting April 2, with no exemptions for any of the bloc's 27 member states.
According to two people briefed on the talks, Šefčovič said that while the final contours of the U.S. trade plan remain unclear, the scale of tariffs discussed would be around 20%—a level that would mark the highest U.S. tariffs on the EU since the bloc's founding members initiated a common trade policy in the late 1950s.
Šefčovič said such tariffs would be "devastating" for Europe's economy, which is already grappling with weak growth and elevated inflation.
President Donald Trump declared that April 2 would be "Liberation Day," a symbolic moment when "reciprocal" tariffs would be introduced against trading partners accused of taking advantage of low U.S. trade barriers.
Šefčovič said the EU would respond in kind, potentially triggering a new round of retaliatory tariffs. The bloc’s trade office has not confirmed what countermeasures are being considered, but Brussels has previously targeted U.S. agriculture, tech and spirits during past disputes.
On Wednesday, Trump also said that new tariffs on imported automobiles would be unveiled.
Markets React, But Seasonality Could Offer Support
Following the tariff threat, iShares Europe ETF (NYSE:IEV), which tracks major European equities, fell 1.4% on Wednesday, marking a two-week low.
Shares of luxury German automaker Mercedes Benz Group AG (OTCPK: MBGAF) plummeted over 4%, eyeing the worst session since November 6, 2024, when they tumbled in reaction to Donald Trump’s election victory.
Similarly, Germany’s biggest automaker, Volkswagen AG (OTCPK: VWAGY), witnessed a 3% drop.
Yet, the selloff may not necessarily trigger a prolonged downtrend, especially for traders looking at seasonality-related strategies.
April has historically brought a tailwind for European stocks. Over the last 25 years, IEV has posted an average gain of 3.2% in April – the most than in any other month – with positive performance in 71% of those years. The strongest April on record came in 2003, when the ETF soared 14.1%.
The SPDR DJ Euro STOXX 50 ETF (NYSE:FEZ)—another benchmark for Eurozone blue chips—has delivered an average April return of 2.9%, ending the month in the green 73% of the time.
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