Dax, Dow slid on escalated Trump-EU trade war tensions

·       Gold surged to a new life time high on tit-for-tat Trump tariffs and a potential delaying of the Ukraine war ceasefire; the US shutdown drama also helping

·       Also fading hopes of any additional Trump tax cut in 2025 dragging overvalued and stimulus addicted Wall Street

·       Trump may blink in his hawkish tariffs narrative with EU, Canada, Mexico, and also China as Musk/Tesla and other big US MNCs are raising objections

Wall Street Futures crumbled in the last few days on tit-for-tat Trump tariffs, the Ukraine war, and Trumpcession concerns. But stocks on both sides of the Atlantic (Europe) were also getting some support on hopes & hopes of a delay in tariffs implementation and progress in the Ukraine and Gaza war permanent ceasefire. The trade tensions between the United States (US) and the European Union (EU) have escalated recently, reminiscent of past disputes over tariffs and trade policies. Almonds, whiskey, auto parts: EU's retaliatory tariffs set up these U.S. states and local products as the biggest losers

Historical Context

In 2002, the US imposed tariffs on steel imports, citing the need to protect its domestic industry. The EU challenged these measures at the World Trade Organization (WTO), leading to a ruling against the US. Consequently, the US lifted the tariffs to avoid EU retaliatory measures. A similar scenario unfolded in 2018 when the US, under President Trump 1.0 imposed tariffs on steel and aluminum imports. The EU responded with counter-tariffs on various US goods, including agricultural products and motorcycles. This dispute also saw WTO involvement, with both sides eventually negotiating settlements.

Recent Developments

On March 12, 2025, the US administration under President Trump 2.0 again announced a 25% tariff on steel and aluminum imports, aiming to protect domestic industries. In response, the EU declared countermeasures targeting €26 billion ($28 billion) worth of US goods, effective from April 1. These EU tariffs will affect a range of products, including bourbon whiskey, almonds, auto parts, motorbikes, and various industrial and agricultural items. Almonds, whiskey, and auto parts- EU's retaliatory targeted retaliatory tariffs set up in various U.S. Republican states; local products as the biggest losers.

European Commission President Ursula von der Leyen (VDL) criticized the US tariffs as "unjustified trade restrictions" that could disrupt supply chains and harm consumers. Despite the retaliatory measures, the EU expressed willingness to engage in negotiations to resolve the dispute, emphasizing that escalating tariffs is not in the best interest of either economy.

The announcement of these counter-tariffs had an immediate impact on European financial markets, which rallied recently on Germany’s pledge to do whatever is required including taking increasing debt and higher fiscal stimulus to fight Trump's trade war stance. Also, the ECB’s less dovish rate cuts helped EUR. This ongoing trade dispute underscores the fragile nature of international trade relations and the potential economic consequences of protectionist policies. Both the US and the EU face challenges in balancing domestic industry protection with the benefits of free trade.

The trade tensions between the United States and the European Union have escalated significantly with the latest imposition of tariffs by the U.S. on steel and aluminum imports. This move has prompted a swift and substantial retaliatory response from the EU. In recent weeks, the U.S. has increased tariffs on steel and aluminum imports to 25%, affecting approximately €26 billion worth of EU exports. This decision is part of President Trump's broader strategy to reshape America's trade dynamics with other nations. The EU, which is the largest trading partner of the U.S., has consistently emphasized its readiness to retaliate against such measures.

EU's Retaliation

In response to Trump’s threat of draconian tariffs, the European Union has announced a two-phase retaliatory strategy:

First Phase: Starting April 1, the EU will reinstate previously suspended tariffs on U.S. goods, including bourbon, motorcycles, jeans, and orange juice. These measures were initially imposed during Trump's first term but were later suspended during negotiations with the Biden administration.

Second Phase: By mid-April, the EU plans to introduce additional tariffs on over €18 billion worth of U.S. exports, targeting products such as cosmetics, clothes, wood, soybeans, and other agricultural goods.

The EU's approach is described as "strong but proportionate," aiming to safeguard European businesses and consumers while keeping the door open for negotiations.

U.S. Response

President Trump has threatened to retaliate further against the EU's countermeasures, stating that any charges imposed by the EU would be matched by the U.S. with "reciprocal tariffs". This stance reflects Trump's belief that the EU has exploited the U.S. economically for decades after decades.

Impact and Future Prospects

The ongoing trade conflict between the U.S. and the EU poses significant risks to both economies. Tariffs can disrupt supply chains, increase consumer prices, and jeopardize jobs on both sides of the Atlantic. Despite these challenges, both the EU and the US have expressed a willingness to negotiate and resolve the dispute.

The EU's strategy of staged retaliation is designed to maintain unity among member states and avoid escalating tensions unnecessarily. However, the situation remains volatile, with the potential for further escalation if a resolution is not reached soon.

The trade war between the U.S. and the EU is intensifying, with both sides imposing tariffs and counter-tariffs. While the EU seeks to defend its economic interests through proportionate retaliation, it remains open to negotiations. The outcome of this conflict will have significant implications for global trade and economic stability along with the biggest geopolitical shift in favor of China, replacing the fast US as the champion of free trade. Also, Trump’s pro-Russian stance is causing great discomfort in the EU and Western Europe. China is rapidly gaining access to Europe for trade and overall global influence.

The trade relationship between the United States (US) and the European Union (EU), two of the world’s largest economic blocs, has historically been a cornerstone of global commerce. However, tensions have escalated in recent years, particularly under the administration of US President Trump, whose protectionist policies have reignited a transatlantic trade war. As of March 13, 2025, the latest developments center around the US imposition of tariffs on steel and aluminum imports and the EU’s swift and robust retaliatory measures.

The US-EU trade war narrative has been shaped by a series of tariff disputes, with a significant escalation during Trump’s first term (2017–2021). In 2018, Trump imposed 25% tariffs on steel and 10% on aluminum imports from the EU, citing national security concerns. The EU retaliated with duties on $3 billion worth of US goods, targeting politically sensitive products like bourbon whiskey, Harley-Davidson motorcycles, and peanut butter. A temporary truce was brokered under the Biden administration, suspending these tariffs until March 31, 2025, as part of negotiations toward a Global Arrangement on Sustainable Steel and Aluminum (GASSA). However, with Trump’s return to office in 2025, the US has reverted to an aggressive tariff policy, disrupting this détente.

On March 12, 2025, the US implemented a blanket 25% tariff on all steel and aluminum imports, effective at midnight Eastern Time (5:01 AM Brussels time). This move, affecting approximately €26 billion worth of EU exports, has been widely criticized by European leaders as unjustified and disruptive, reigniting the trade war narrative of economic nationalism versus multilateral cooperation.

EU’s Latest Retaliation: March 2025 Update

The EU responded decisively within hours of the US tariffs taking effect on March 12, 2025. European Commission President Ursula von der Leyen (VDL) announced a two-phase package of retaliatory tariffs targeting up to €26 billion ($28 billion) in US exports. This response marks a significant escalation compared to the EU’s actions during Trump’s first term, reflecting a firmer stance and greater preparedness.

Phase 1: Rebalancing Measures (Effective April 1, 2025) 

The EU will reintroduce “rebalancing measures” initially imposed in 2018 and suspended in 2021 under Biden. These tariffs target €8 billion ($8.7 billion) in US goods, including iconic products such as bourbon whiskey, Harley-Davidson motorcycles, jeans, boats, and peanut butter. For certain items like whiskey and motorcycles, tariffs could reach up to 50%, designed to exert maximum political and economic pressure on Republican-leaning US states.

Phase 2: Additional Duties (Effective Mid-April 2025) 

A second wave of tariffs will target an additional €18 billion ($19.6 billion) in US exports, pending approval from EU member states and consultations with industry stakeholders.  This phase will expand the scope to include steel and aluminum products, agricultural goods (e.g., poultry, beef, seafood, nuts, and soybeans), and industrial items like textiles, leather goods, home appliances, plastics, and wood.  The EU has strategically selected products to target key US constituencies, such as soybeans from Louisiana, home to House Speaker Mike Johnson, signaling a calculated approach to influence US policy.

The total value of EU countermeasures (€26 billion) closely mirrors the estimated impact of US tariffs on EU exports (€28 billion), underscoring the EU’s commitment to a “proportionate” response. Von der Leyen emphasized, “As the U.S.  applying tariffs worth 28 billion dollars, we are responding with countermeasures worth 26 billion euros,” highlighting the bloc’s intent to restore balance while leaving room for negotiation.

Trade War Narrative: Competing Perspectives

The US narrative- driven by Trump frames tariffs as a tool to address trade imbalances and protect American industries. Trump has long criticized the EU for its trade surplus with the US—$155.8 billion in goods in 2023, per Eurostat—claiming the bloc “takes advantage” of the US by restricting imports like cars and farm products. On March 12, 2025, Trump vowed to retaliate against the EU’s countermeasures, stating during an Oval Office meeting, “Of course, I’m going to respond,” raising the specter of further escalation. Trump always sees the EU as the ‘mini-China, but more harmful than China and tougher to negotiate’. Trump alleges the EU charges much higher tariffs and VATs on US cars, while the US charges only 2.5% on EU cars as tariffs.

Conversely, the EU portrays itself as a defender of free trade and multilateralism, arguing that tariffs harm consumers and businesses on both sides of the Atlantic. Von der Leyen has stressed, “Tariffs are taxes. They are bad for business, and even worse for consumers. These tariffs are disrupting supply chains.” EU Trade Commissioner Maroš Šefčovič, reflecting on a failed attempt to negotiate with Washington in February 2025, noted, “You need both hands to clap,” signaling frustration with the Trump administration’s disengagement.

Economic and Political Implications

Economic Impact: The EU estimates a potential loss of 3.7 million tons of steel exports to the US, its second-largest market (16% of total steel exports), exacerbating an already strained European steel industry. Higher costs for US consumers and inflation risks in both regions are anticipated as companies pass on tariff expenses. 

Political Ramifications: The EU’s targeted retaliation aims to pressure US policymakers by hitting Republican strongholds, a tactic refined from 2018. However, this risks deepening transatlantic divisions, especially as Trump has questioned NATO commitments and US security guarantees for Europe. 

Global Context: The US-EU clash occurs amid broader trade tensions, with Canada imposing $20.7 billion in tariffs on US goods and China potentially redirecting cheap exports to Europe, complicating the EU’s economic strategy.

EU’s Strategic Posture

Unlike Britain, which has opted against immediate retaliation in pursuit of a broader US trade deal, the EU has adopted a dual approach of retaliation and negotiation. Von der Leyen reiterated the bloc’s openness to dialogue, stating, “We will always remain open to negotiation.” However, the EU’s rapid deployment of countermeasures—bolstered by a “Trump task force” formed in 2024—demonstrates a shift toward a more assertive stance, leveraging its $1.7 trillion transatlantic trade relationship as both a shield and a weapon.

In Summary:

As of March 13, 2025, the US-EU trade war narrative reflects a deepening divide between American protectionism (under President Trump) and European multilateralism. The EU’s latest retaliation—€26 billion in tariffs phased over April 2025—marks a significant escalation, signaling its readiness to defend its economic interests against US aggression. While the door to negotiation remains ajar, the risk of a protracted trade war looms large, with profound implications for transatlantic relations, global supply chains, and economic stability. The coming weeks will test whether both sides can find common ground or if this tit-for-tat spiral will define their relationship in 2025 and beyond. Trump threatened 200% tariffs on French & other EU alcohols if the EU tariffs of 50% on US whisky are not removed immediately.

On Thursday (13th March 25), Megalomaniac Trump wrote a series of Truths on trade & tariffs:

“The European Union, one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States, has just put a nasty 50% Tariff on Whisky. If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S.”

“The Globalist Wall Street Journal has no idea what they are doing or saying. They are owned by the polluted thinking of the European Union, which was formed for the primary purpose of “screwing” the United States of America. Their (WSJ!) thinking is antiquated and weak, and very bad for the USA. But have no fear, we will WIN on everything!!! Egg prices are down, oil is down, interest rates are down, and TARIFF RELATED MONEY IS POURING INTO THE UNITED STATES. “The only thing you have to fear is fear itself!”

“The U.S. doesn’t have Free Trade. We have “Stupid Trade.” The Entire World is RIPPING US OFF!!!”

“Canada needs America, America does not need Canada.”- Grant Cardone of Cardone Capital, on Stuart Varney & Co.”

Trump further said:

·       We don't need Canada’s cars, energy, or lumber

·        There will be a little disruption and won't be long

·       NATO is stepping up

·       I won't bend on Canada metals or April 2nd tariffs

·       A Government shutdown could delay the tax bill

·       A shutdown might lead to very, very high taxes

·       Facebook is going to invest $60 bln by the end of the year

·       EU is very nasty. EU taking billions from American businesses

·       The EU and China are treating us very badly

·       I inherited egg price problems

·       White House Says Trump Won't Cut Social Security, Medicare Following Musk Interview

·       I think the annexation of Greenland will happen

·       We're going to have to make a deal on Greenland

·       I don't think Russia will attack other allies. We'll make sure it doesn't happen

·       I still have a good relationship with the North Korean leader

·       I'm not going to bend at all Trump doubles down on tariff plans as stocks sink

The EC President von der Leyen (VDL) said:

·       The EU will defend its interests on tariffs.

·       We're open to negotiations with the US on tariffs

·       EU Trade Commissioner to have a call with US counterpart on Friday

Conclusions:

Europe/EU now has to stand up on its own feet after being dependent on the US for almost 80 years. EU has to build its own military force and foreign policy. Europe now has to make a security deal with ‘mighty’ Russia rather than too much Russia phobia, leading to the Ukraine war. EU also has to accept China as the number one superpower in terms of economy, technology, and development and keep good relations for mutual benefit rather than too much dependency on the US, which has no policy stability like under Biden and Trump admin. But Trump may blink on his hawkish tariffs narrative after seeing the Wall Street meltdown and concern by Real Street including his billionaire advisor Musk, whose Tesla is now facing higher tariffs for its parts and the dilemma of high prices if built in America. Tesla (US) is already raising its tariff concern officially with the USTR.

Market Wrap:

Wall Street crumbled Thursday on escalated Trump/US-EU trade war tensions and fading hopes of an imminent Ukraine war ceasefire. Also, a looming US shutdown drama is affecting risk trade and also USD. The US dollar is also under pressure despite the narrative of the primary beneficiary of the Trump trade war tantrum. The deluge of retaliatory tariffs by the EU and Canada on US exports is also affecting the USD. But GBP is stable and gaining a lot due to the relatively stable trade relationship between the US/Trump and the UK.

The S&P 500 slid 1.4%, entering technical correction territory (10% from the recent top/life time high), while the Nasdaq 100 dropped 1.9%, led by Apple and Tesla. The Dow Jones lost 536 points, slipping below the 41,000 mark for the first time in weeks. Although overall core CPI and core PPI data were softer than expected without any signs of Trump’s China tariffs induced higher imported inflation. But this may be because of the deluge of advance imports in the last few months to beat Trump's tariff tantrum. The impact of Trump’s draconian tariffs may be visible from H2CY25 if implemented at face value from Q1CY25.

In corporate news, Adobe shares plunged after issuing a weak AI revenue outlook (guidance warning), while Intel surged following the announcement of a new CEO, who may be instrumental in regaining the past leading position of the company in the chip market, which is presently dominated by AI chip king NVIDIA.

Weekly-Technical trading levels: DJ-30, NQ-100, Gold and Dax

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 43850) now has to sustain over 44050 for any further rally to 44250/44400-44500/44800 and 45000/45200-45300/45500 and 45700/45800-45900/46000 in the coming days; otherwise sustaining below 44000, DJ-30 may again fall to 43800/43675-43300/43150 and 42800/42700-42000/41900 in the coming days.

Similarly, NQ-100 Future (20915) has to sustain over 21050 for a further rally to 21300/21500-21700/21850 and 22050/22200-22350/22500 and 22700/23000-23300/23500 in the coming days; otherwise, sustaining below 21000, NQ-100 may again fall to 20900/20600-20400/20150 in the coming days.

Technically, DAX-40 (22500) now has to sustain over 22700 for a rally to 22800/22/900-23000/23500 and 23600/23700-23800/24000; otherwise, sustaining below 22650/22550, may again fall to 22250/21850-21700/21100 and 20800/20000-19700/19000-18850 in the coming days.

Also, technically Gold (CMP: 2985) has to sustain over 3005 for a further rally t 3025/3060-3075/3100 and 3125/3150-3200/3225; otherwise sustaining below 3000-2995, Gold may again fall to 29650/2925-2900/2880 and 2850/2835-2810/2780-2780 and 2745/2725-2695/2665 and further 2635/2600-2585/2560 in the coming days.