Trump's new tariffs spark swift EU retaliation, raising fears of a global trade escalation

Transatlantic Trade War Escalates: EU Vows to Retaliate Against US Tariffs

US President Trump announced that, starting August 1, a 30% tariff will be imposed on EU imports, provoking immediate anger from the EU. European Commission Trade Commissioner Šefčovič clearly stated that if trade negotiations break down, the EU is prepared to implement counter-tariffs on American goods worth 72 billion euros (approximately 84 billion dollars). At a meeting of EU member state ministers, Danish Foreign Minister Rasmussen bluntly stated that the US tariff threat is "absolutely unacceptable" and emphasized that the EU is ready to retaliate.

The potential counter-list mainly targets industrial products, including aircraft, cars, and their components, aiming to exert equal pressure on the US economy. Šefčovič warned that the 30% tariff would severely impact transatlantic trade and supply chains, making it "almost impossible" for trade to continue as before. Despite the tense situation, the EU remains committed to resolving issues through negotiation, and Šefčovič will continue new rounds of talks with the US. However, Trump's strong statements, such as "the deal is done, there's nothing more to discuss," cast a shadow over the negotiation prospects.

German Economy Shows Resilience, Eurozone Outlook Mixed

Amid escalating trade tensions, the German economy has shown resilience exceeding expectations. In July, the ZEW German Investor Confidence Index surged to 52.7, far exceeding market expectations, indicating that investors' optimism about the German economy in the coming months has strengthened. Although the shadow of trade conflict lingers, about two-thirds of surveyed experts still expect an improvement in the German economy. Analysts generally believe that the forthcoming public spending surge plans have offset some concerns about US tariffs.

However, there is division in the market on whether this growth momentum can translate into sustainable recovery. Some institutional analysts expect the German economy to return to growth in 2025, predicting a GDP growth of 0.2%, which is more optimistic than most forecasters. At the same time, the Eurozone July ZEW Economic Sentiment Index also slightly rose to 36.1, but remains below expectations, indicating that market confidence in the overall economic trajectory of the Eurozone is still reserved.

US Inflation Rising, Federal Reserve Faces Complex Policy Dilemma

The US Bureau of Labor Statistics released data showing an increase in the June Consumer Price Index (CPI), with inflation rising by 2.7% year-on-year, up from 2.4% in May. The core CPI rose by 2.9% year-on-year, in line with expectations. Although the core inflation rate excluding food and energy rose slightly less than expected, prices for some tariff-sensitive items, such as clothing and household goods, increased, suggesting that the impact of tariffs on prices may be gradually emerging.

This data has complicated the Federal Reserve's position on interest rate cuts. Although the market broadly expects the Fed to keep rates unchanged at the end of July's meeting, signs of rising inflation and the uncertainty brought by tariff policies make the future course of monetary policy increasingly uncertain. Particularly with the Trump administration's continuous pressure on the Fed for rate cuts, even suggesting the possibility of replacing the Fed chair, it undoubtedly adds policy uncertainty. Analysts point out that the current US economic situation differs from past scenarios requiring steep rate cuts, and excessively low rates might risk an inflation rebound and damage the dollar's credibility.

Market Volatility Intensifies, Focus Shifts to Corporate Earnings and Geopolitics

The combination of trade tensions, inflation data, and Fed policy uncertainty has led to increased global market volatility. European stock markets are generally rising on signs of possible trade talk de-escalation, but investors are closely watching the upcoming second-quarter earnings reports from European and American companies to assess the real impact of the trade war on corporate profits. The performance report of chip equipment giant ASML is particularly in focus, being seen as an industry barometer.

Meanwhile, ongoing geopolitical conflicts continue to pose a threat to the global economy and market sentiment. The conflict between Russia and Ukraine persists, with Putin refusing Western peace terms and stating continued fighting. In the Middle East, the escalation of Israeli airstrikes in Syria and Lebanon, and the rising risk of conflict between Hezbollah and Israel, further exacerbate threats. These geopolitical events keep the global multilateral trading system under pressure and may further transmit risks to the energy and financial markets.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.