On Thursday, April 3, 2025, global financial markets are experiencing significant turbulence following U.S. President Donald Trump’s announcement of sweeping new tariffs, sparking widespread declines in stock indices across Europe and the United States.

Investors reacted swiftly, driving major indices and futures contracts to multi-month lows, including Euro Stoxx 50, S&P 500 and Nasdaq 100. In this article, we examine how European stock markets opened on Thursday, the current prices of futures on Wall Street, and the reasons behind gold reaching new record highs.

Why Are Stocks in Europe and the US Falling After Trump’s Tariffs Announcement?

The announcement, dubbed “Liberation Day” by Trump, introduced tariffs ranging from 10% on imports from numerous countries to as high as 50% on goods from specific nations like Lesotho, with an effective rate on Chinese imports exceeding 50% when combined with existing duties. This aggressive trade policy shift sent shockwaves through global markets, amplifying fears of a potential trade war and disrupting supply chains.

LIBERATION DAY RECIPROCAL TARIFFS 🇺🇸 pic.twitter.com/ODckbUWKvO

— The White House (@WhiteHouse) April 2, 2025

In Europe, the Euro Stoxx 50 index opened the day at its lowest levels since February, though it later rebounded slightly by 0.39% to 5,210. However, the broader Euro Stoxx 600 index slid 1.2% to 530, testing its weakest point since January.

Germany’s DAX index also took a hit, dropping 1.3% to 22,104 after earlier touching two-month lows. These declines reflect growing concerns among European investors about the impact of U.S. tariffs on export-heavy economies, particularly in sectors like automotive and manufacturing.

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Across the Atlantic, U.S. markets mirrored this pessimism. Futures contracts on the S&P 500 fell approximately 3% to 5,549 ahead of Thursday’s cash market opening, though intraday lows hit 5,481—the lowest since September 2024, marking a six-month trough.

Similarly, Nasdaq 100 futures shed 3.2% to 19,134, with earlier intraday lows at 18,819, also a six-month bottom. Since their December peaks, Nasdaq futures have plummeted 16%, while S&P 500 futures are down roughly 10%, underscoring the tech-heavy index’s vulnerability to trade disruptions.

"There are many themes that are playing out in financial markets right now," said Kathleen Brooks, research director at XTB. "The hardest hit sectors in Europe include industrials, tech, consumer discretionary and financials. The sell off in tech, industrials, and consumer discretionary can be explained by their exposure to global growth and global supply chains, while financials in Europe are selling off as the prospect of deeper rate cuts by the ECB could knock the banks’ net interest income in the coming months."

Why Are Markets Reacting So Strongly?

The sharp sell-off can be attributed to several factors tied to Trump’s tariff policy:

1. Trade War Fears: Analysts warn that the tariffs, which Trump described as “reciprocal” but halved from what trading partners impose on the U.S., could provoke retaliatory measures from countries like China and the European Union. This tit-for-tat escalation threatens to derail global trade flows, a critical driver of economic growth.
2. Inflation and Cost Pressures: Higher tariffs are expected to increase the cost of imported goods, potentially reigniting inflation in the U.S. and beyond. Companies like Nike, Ralph Lauren, and Estée Lauder saw after-hours declines of 6%, 5%, and 3.5%, respectively, on April 2, as their reliance on international supply chains and sales came under scrutiny.
3. Economic Growth Concerns: The tariffs coincide with already softening economic data. A Federal Reserve Bank of Atlanta forecast suggests U.S. GDP could contract at an annual rate of 1.8% in Q1 2025, raising recession risks. Goldman Sachs recently upped its U.S. recession probability to 35% and slashed its S&P 500 year-end target to 5,700, reflecting a gloomier outlook.
4. Sector-Specific Impacts: European firms like Puma (-9%), Adidas (-8.6%), Volvo Cars (-9%), and Maersk (-7.4%) saw steep declines, highlighting vulnerabilities in retail, automotive, and shipping sectors. In the U.S., the Stoxx Autos index dropped over 2% as Trump’s 25% tariffs on imported vehicles compounded existing duties on steel and aluminum.

From Wall Street to Main Street

The market’s reaction isn’t just a numbers game—it has tangible consequences. For instance, a U.S. consumer buying a car with 50% foreign-sourced parts could face price hikes of $3,000 to $8,000, according to S&P Global Mobility. European exporters, meanwhile, fear losing competitiveness in the U.S. market, a key revenue source. Maersk, a global trade bellwether, saw its 7.4% drop as a signal of broader supply chain disruptions ahead.

Investors are also flocking to safe-haven assets. Gold futures hit a record $3167 today, with Goldman Sachs raising its year-end forecast to $3,300, driven by central bank buying and market uncertainty. U.S. 10-year Treasury yields slumped to a five-month low, and the Japanese yen strengthened as risk-off sentiment took hold.

"Overall, stocks are down around the world, but these are not traditional panic moves, suggesting that there is still some expectation that deals can be cut to reduce some of the impact from tariffs. The FX market is not moving on the back of yield differentials today, instead it is moving on the back of growth outlooks after the US trade policy threw a grenade into the global economy," added Brooks.

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S&P 500 Expert Predictions

Will the declines persist? Jochen Stanzl of CMC Markets described the mood as a “bleak atmosphere on trading floors worldwide,” suggesting sustained volatility until retaliatory measures and economic impacts clarify. UBS cut its S&P 500 year-end forecast from 6,600 to 6,400, anticipating a potential 25% drawdown from recent peaks if a recession materializes.

Sam Stovall, chief investment strategist at CFRA Research, warns that President Donald Trump’s broad new tariff measures might drive the S&P 500 into correction territory, with a potential decline of at least 10% from its February all-time high.

“I think it’ll probably push the markets lower,” Stovall told CNBC in an interview. “They will continue lower tomorrow and certainly retest the 10.1% sell-off threshold, and probably push us into a bit deeper of a correction. People were hoping for clarity and it added to opaqueness.”

What about a trade war? Fitch economists note the effective U.S. tariff rate could hit 22%—the highest since 1910—potentially triggering counter-tariffs. Jacob Pedersen of Sydbank warned that industries like pharmaceuticals could face long-term investment challenges if trade tensions escalate.

Stay tuned for FinanceMagnates.com updates as this story develops.