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Stock Market Plunges Amid Trump’s New Tariff Threats Against EU and Apple
Major Wall Street indices experienced a sharp decline early Friday after President Donald Trump announced potential new tariffs on goods from the European Union (EU) and specifically targeted Apple. These tariff threats immediately impacted market sentiment, causing significant drops across various sectors.
Market Reaction to Tariff Announcement
President Trump stated on Friday morning that he would impose tariffs of 50 percent on European goods starting June 1. The news quickly reverberated throughout the financial markets.
- Dow Jones Industrial Average: Plunged by 1 percent within the first 30 minutes of trading.
- S&P 500: Declined by 1.2 percent.
- Nasdaq: Suffered a significant drop of 1.5 percent.
Apple Shares Tumble Following Individual Tariff Threat
In addition to the broader EU tariffs, Apple shares plummeted by 2.5 percent after a separate threat by Trump to impose tariffs on iPhones not manufactured domestically in the United States.
Broader Economic Impact
The market instability extended beyond stocks, with Treasury yields and the dollar also weakening in response to the announcement. This occurred during a week when bond markets were already processing data from the Congressional Budget Office indicating that tax reductions in Trump’s budget bill could add an estimated $3.8 trillion to the national debt.
Trump’s Explanation for Tariff Actions
The President took to social media platform Truth Social on Friday morning to express his dissatisfaction with the EU, accusing them of being “very difficult to deal with” and “taking advantage” of the United States.
Impact on Trade Policies and Investor Confidence
Trump’s recent threats reignited apprehensions regarding his trade policies, notwithstanding a recent agreement with Britain and a temporary truce on tariffs with China.
- Analyst Commentary: Market experts noted that the previously optimistic outlook on trade deals was erased almost instantaneously.
- Historical Pattern: Some economists pointed out that historically, markets tend to decline when Trump increases tariffs and rise when he reduces them.
Details of the Proposed Tariffs
Trump conveyed on social media a trade shortfall of $250,000,000 between the U.S. and Europe annually, deeming it unacceptable.
Key Points:
- Specific Tariff: A “straight 50 percent tariff” on the EU was threatened.
- Manufacturing Condition: No tariff would apply if products are manufactured within the United States.
- Apple’s Situation: Trump stated a tariff of at least 25% must be paid by Apple to the U.S. if manufacturing isn’t moved to within the US.
Comparison to China Tariffs
The proposed 50 percent tariff exceeds the levies imposed on China, which were initially raised to over 100 percent but later reduced to 30 percent.
Apple’s Manufacturing Dilemma
Trump’s critique of Apple followed a recent White House meeting with CEO Tim Cook. This individual targeting of a major corporation resulted in notable stock depreciation for Apple.
- Increased Costs: Analysts suggest labor cost alone could increase the cost of an iPhone by 25 percent.
- Potential Price Increase: Manufacturing iPhones in the U.S. could potentially raise the price to $3,500.
- Manufacturing Locations: While Apple designs products in California, most manufacturing is outsourced abroad.
Recent Events Leading to Tension
Trump’s market-moving announcements occurred after he held a highly publicized dinner with investors in his $STRUMP memecoin at his northern Virginia golf club.
- Controversy: The White House declined to disclose the guest list, sparking ethics concerns.
- Market Reaction: After Trump’s social media comments, S&P futures dropped 1.5 percent before markets opened in New York.
EU’s Response and Broader Implications
The EU refrained from an immediate response to Trump’s tariff threats, opting to await a scheduled discussion between EU trade leader Maros Sefcovic and US trade representative Jamieson Greer.
Potential Impacts on Key EU Exports
Many products could see price increases if the planned tariffs take effect in June.
- Pharmaceuticals
- Cars
- Machinery
- Petroleum oils
- Medical instruments
- Alcohols
- Car parts
- Electrical appliances
- Chemicals
Industry Concerns and Potential Retaliation
Industry leaders expressed concerns about potential retaliatory actions from the EU. Chris Swonger, CEO of the Distilled Spirits Council, highlighted the importance of continued negotiations to avoid tariff escalations, potentially affecting the U.S. hospitality sector and American distilleries.
Context: UK Trade Deal
Trump’s threat to the EU came weeks after a trade deal with UK Prime Minister Keir Starmer to lower U.S. tariffs on cars imported from the UK.