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Donald Trump has threatened to impose 50 per cent tariffs on the EU from next month, as he ruled out striking a trade deal with Brussels.
The president said negotiations with the bloc were “going nowhere” and warned he would impose the levy on all EU imports from June 1.
Speaking in the Oval Office on Friday, he said: “I’m not looking for a deal. I mean, we’ve set the deal. It’s at 50 per cent.”
Mr Trump suggested the EU can only avoid tariffs “if they build plants here”. “Starting June 1, it’s moving forward,” he added.
The fresh escalation of Mr Trump’s trade disputes, after tensions had recently been cooling, sparked a sell-off for stock markets in both Europe and the US.
Mr Trump criticised the EU for “never treating us properly” while heaping praise on Britain for signing a “great deal”.
In a post on Truth Social, Mr Trump castigated the EU for running a large trade surplus with the US. He also criticised its trade barriers and value-added tax, its regulatory actions against US companies and “ridiculous corporate penalties”, as well as its “monetary manipulations”.
Mr Trump also berated the EU as “very difficult to deal with”.
Scott Bessent, the US Treasury Secretary, told Fox News the president was frustrated at “the EU’s pace”. He said: “The president believes the EU proposals have not been of the same quality as we’ve seen from our other important trading partners. I would hope that this [Truth Social post] would light a fire under the EU.”
Mr Trump’s post “recommending” a 50pc tariff came just hours before a call between US Trade Representative Jamieson Greer and EU Trade Commissioner Maros Sefkovic.
Many commentators interpreted Mr Trump’s post as a negotiating tactic, designed to push Brussels into moving more quickly and conceding more ground.
EU member states export $600bn (£447bn) to the US annually and tariffs would be hugely damaging, particularly to Germany and Ireland, which send cars and drugs in large quantities to America.
UK ‘well out’ of the EU
Micheál Martin, the Irish Taoiseach, said Mr Trump’s threat was “enormously disappointing” and warned that tariffs “would grievously damage one of the world’s most dynamic and significant trading relationships.”
Laurent Saint-Martin, the French trade minister, said the US president was “not helping during the negotiation period between the European Union and the United States.”
Johann Wadephul, the German foreign minister, said the comments “help nobody”.
Brussels has long feared being targeted by Mr Trump and prepared retaliatory tariffs covering at least €95bn (£80bn) of US imports into the EU. Members have already signed off on a more immediate €21bn package of levies of up to 50pc on products including wheat, motorcycles and clothing.
The threat of tit-for-tat tariffs between the two superpowers sparked a sell-off for stock markets around the world.
Germany’s main stock market, the Dax, fell 1.5pc and France’s Cac 40, its equivalent of the FTSE 100, dropped by 1.7pc.
In the US, the S&P 500 fell almost 1pc while the tech-heavy Nasdaq dropped by as much as 1.6pc. Wall Street’s “fear gauge”, the Vix, spiked to a more than two-week high, jumping as much as 25.9pc.
The UK fared much better, with the FTSE 100 down just 0.2pc.
Mark Francois, the Tory chairman of the European Research Group, said it showed why Britain was better off “well out” of the EU.
He told The Telegraph: “As the PM himself recently admitted in the Commons, we could not have agreed the recent set of trade deals – including with the US – if Britain were still in the EU.
“President Trump has always been sceptical about the EU as an organisation and his imposition of major tariffs highlights yet another reason why we’re well out of it.”
Despite striking a deal with the US, Britain could be impacted. Capital Economics chief UK economist Paul Dales warned that UK exports to a weaker EU might decline, although shipments to the US might increase.
John Denton, secretary-general of the International Chamber of Commerce, said an EU-US trade war would “chill investment decisions, disrupt essential supply chains and undermine market confidence”, spiralling out beyond the Atlantic.
He said: “A sharp escalation in tariffs between two central pillars of the global economy risks sending shockwaves through the global business community at a time when stability is at an absolute premium.”
Former Conservative European parliamentarian and Brexit advocate Daniel Hannan said: “It will have negative consequences for the entire world. To say ‘Brexit benefit’ is beside the point. Even if we are not hit ourselves, we will be caught in the crossfire.”
The president’s rekindling of trade tensions comes almost exactly halfway through a 90-day “pause” in the tariffs that he set for almost every country on April 2.
The UK is one of the only countries to have so far negotiated a deal to fend off the resumption of tariffs once the pause ends in early July. The EU, which has to juggle the interests of 27 member countries, has moved more slowly and cautiously.
Washington is said to be demanding unilateral tariff cuts from Brussels on US imports into the EU, and also wants Brussels to weaken rules governing American companies.
Tech tensions
Eurocrats have offered a deal that would see tariffs on industrial goods slashed to zero alongside a reduction in levies on some agricultural products, including a symbolic overture on lobster.
Diplomats have revealed the draft offer includes plans to boost purchases of US goods in strategic sectors, such as 5G and 6G mobile networks and energy. There would also be a concerted effort to work more closely on strategic industries, like steel, aluminium, semiconductors and electric vehicles.
Brussels has suggested it could review its paperwork demands on US products, especially agricultural. Most importantly, the EU was prepared to be tougher on China, including hitting Beijing with harsher tariffs.
However, the EU has refused to consider scrapping taxes on digital companies, exempting US businesses from VAT or easing regulations on tech firms.
Beyond Europe, Mr Trump also took aim at Apple, with the president vowing that any iPhone not made in the US would face a 25pc tariff. He said on Friday that this would also apply to Samsung and other smartphone companies.
Apple has shifted some iPhone production from China to India, but Mr Trump said on Truth Social that this would not be enough to avoid a 25pc tariff. Shares in Apple fell by more than 2.5pc.
“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States,” Mr Trump said, “not India, or any place else.”
White House officials have repeatedly raised the prospect of a “Made in America” iPhone, despite the fact such a handset would cost thousands of dollars more than current models.
Dan Ives, a technology analyst at Wedbush Securities, said a US-made iPhone was a “fairytale concept”. “Paying a 25pc tariff from India would put Apple in a very difficult situation and would likely have to pass higher prices to consumers,” he said.
Smartphones are currently exempted from Mr Trump’s most punishing tariffs on China.
06:14 PM BST
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06:02 PM BST
Trump agrees to hold ‘productive’ round of talks with Japan
Japan’s prime minister Shigeru Ishiba has spoken with Donald Trump and agreed to hold “productive” discussions at an upcoming round of tariff talks between the two sides.
Mr Ishiba told reporters that he wanted to increase “investment, not tariffs”. He said Japan’s position to keep pushing Washington to drop all recent tariff measures is unchanged and that he stands by plans to push for Japanese investment to create more jobs in the US in exchange.
The two leaders held talks just after Ryosei Akazawa, Japan’s chief tariff negotiator, headed to Washington for a third round of talks with his US counterparts. In the earlier rounds of talks, the US had not agreed to the Japanese requests.
Mr Ishiba said he reminded Trump that Japan’s position was for the US administration to scrap all recent tariffs on imports from Japan, to which the US president made no specific response.
“I expressed my expectations for productive discussion to be held, and we agreed,” Mr Ishiba told reporters.
05:45 PM BST
Chip-making machine restrictions on China must continue, Trump aide says
Restricting the sale of extreme ultraviolet (EUV) lithography equipment to China is the “single most important export control” the United States has in the area of chip manufacturing, the White House’s AI and crypto czar David Sacks has said.
“The first Trump administration began the restriction, and it’s of paramount importance that it continues,” Mr Sacks wrote on X.
Dutch company ASML makes EUV chip-making machines, which produce the most sophisticated semiconductors.
Lithography systems use beams of light to help to create the chip circuitry. ASML’s first generation of EUV systems, currently used to make most chips in smartphones and AI chips, use light in the “extreme ultraviolet” wavelength to create design features down to 13 nanometres in resolution, smaller than a virus.
05:36 PM BST
US not to blame for bond yield hikes, claims Bessent
Scott Bessent has said that the US is not the cause of rising bond yields.
The US Treasury secretary told Bloomberg TV: “The notion that any movements in the bond market [is] being driven by the action of Congress is what’s wrong.
“This has been a global phenomenon. The Japanese yields have moved substantially, the German, UK, and if we go back and look since the beginning of the year to Jan 20 when the Trump administration came in, the US 10-year is the old yield that is lower today.”
The comments come after an auction for 20-year US bonds was hit by weak demand and yields on 30-year bonds hit 19-month highs on Thursday.
Michael de Pass, of Citadel Securities, told Bloomberg: “If we’re in a world where deficits and overall debt levels continue to expand and there’s more supply, then the level of interest rates required to clear that should be somewhat higher. This move in yields is not a US-only phenomenon. We’re seeing yields rise globally. It’s the idea of expansionary fiscal policy globally.”
05:27 PM BST
Bessent hails US-German ‘reset’
Scott Bessent has said he hopes his relationship with the German government will push Brussels to negotiate a better trade deal.
In an interview with Bloomberg TV, he said: “There are 27 countries - they all have different needs. The Germans are interested in cars, the French in agriculture, and then you have Brussels negotiating with them.
“Now I am very impressed [with] my German counterpart. [Lars Klingbeil] was very responsive. I think that the new Chancellor [Friedrich] Merz is going to give an opportunity for a US-Germany reset.
“So I’m very optimistic that perhaps Germany can help push the EU forward.”
05:14 PM BST
Trump tariffs show Britain ‘well out’ of the EU
Mark Francois, the Tory chairman of the European Research Group, said the Trump tariffs showed why Britain was better off “well out” of the EU.
He told The Telegraph: “As the PM himself recently admitted in the Commons, we could not have agreed the recent set of trade deals - including with the US - if Britain were still in the EU.
“President Trump has always been sceptical about the EU as an organisation and his imposition of major tariffs highlights yet another reason why we’re well out of it.”
05:05 PM BST
Cognac industry warns over Trump plan
A senior official representing the cognac industry has slammed Donald Trump’s latest tariffs proposal for the European Union, saying it would put the cognac industry in an untenable position.
Earlier, Mr Trump recommended a 50pc tariff on European Union goods starting June 1.
“The 50 percent tariffs proposed by President Trump would mean we will no longer be able to sell our products in the United States, which is our biggest market, representing more than 50 percent of cognac sales in terms of volumes”, the official told Reuters.
05:00 PM BST
Europe’s luck runs out as Trump trains his guns on Brussels
For a moment, it looked like the EU might be having a good trade war.
Germany’s economy grew by 0.4pc in the first three months of the year, twice the 0.2pc initially estimated, as American importers desperately shipped as much as they could before Donald Trump’s initial wave of tariffs came into force. It was the strongest growth in two and a half years.
But Europe’s luck may have already run out: Mr Trump has thrown a wobbler, accusing Brussels – seemingly with little self-awareness – of being “very difficult to deal with”.
“Our discussions with them are going nowhere! Therefore, I am recommending a straight 50pc tariff on the European Union, starting on June 1 2025,” the US president posted on his Truth Social website.
Mr Trump has long resented the EU, repeatedly claiming it was formed to “screw” the US. But until now his focus has been on China.
It is no coincidence that he is now training his guns on Brussels after reaching a truce in his battle with Beijing.
04:58 PM BST
New US ambassador meets Starmer after Trump urges Britain to drill for more oil
US Ambassador Warren Stephens has met Sir Keir Starmer “convey the priorities of the Trump administration”, after Donald Trump urged the UK to ditch wind power projects and drill for oil.
The US Embassy said those priorities include “maximising the US-UK partnership to advance our shared interests, such as the recently announced trade deal and our defence and security alliance which promotes stability and prosperity worldwide”.
The embassy said the meeting at 10 Downing Street was the second for the two men since the ambassador, a billionaire investment banker and Republican donor, took up his post on May 12.
04:54 PM BST
Bessent says US to negotiate ‘in person’ with China again
Scott Bessent has said that he expects in-person negotiations to begin with China again as he claimed that several large trade deals could be made in the next two weeks.
Earlier this afternoon, the US Treasury secretary said: “These deals are moving quickly, and I think as we approach the end of the 90-day period [since a pause on Donald Trump’s highest tariffs], we’re going to see more and more of them announced.
“Many of the Asian countries have come with very good deals.”
04:46 PM BST
Trump’s EU comments ‘will hinder stock market recovery’
Donald Trump’s latest criticism of the EU will hinder growth in the stock market, an analyst has said.
Kathleen Brooks, research director at XTB, said: “If tariff risks persist with the EU, we think the impact on risk sentiment will be more contained than in April.
“The reason is that the risk is now concentrated in the EU, since the US has already got several trade agreements under its belt, for example with China, the Gulf and the UK.
“Thus, even if the EU does retaliate with tariffs on US goods over the weekend, we think that the fall out will not have as pronounced an effect as before.
“However, it does make it hard to see another leg higher in the stock market recovery, and the dollar is likely to remain impacted.”
04:41 PM BST
Irish PM attacks ‘enormously disappointing’ Trump move
The Irish premier Micheál Martin has criticised Donald Trump’s latest threat to hike tariffs on EU goods and said that the current process of negotiations were “the best and only sustainable way forward”.
He said: “The EU has been negotiating in good faith in that process and, I understand, Commissioner Sefcovic was due to talk to his US counterpart again this afternoon.
“Tariffs at the level suggested would not only push prices up, they would grievously damage one of the world’s most dynamic and significant trading relationships, as well as disrupting wider global trade.
“We do not need to go down this road.”
The comments came after Donald Trump lashed out on the EU’s negotiating strategy, claiming: “Our discussions with them are going nowhere!”
04:35 PM BST
Markets noting benefit from US-UK trade deal
Investors looked more favourably on the UK today than the continent after Britain was left out of Donald Trump’s latest sabre rattling.
The FTSE 100 lost 0.2pc, but Germany’s main index fell 1.5pc and France’s top index lost 1.7pc.
Andrew Griffith, the shadow business secretary, said: “One of the key benefits of Brexit is that the UK now determines its own trade policy.
“Rather than having to beg Ursula von der Leyen and her Brussels commission to represent our interests as one of 27 other countries, the British PM was able to be in the room with Trump directly and we are not caught up in the protectionist EU.”
Julian Jessop, a leading economist, wrote on X: “The uncertainty alone is bad for everybody, including the US, but if Trump actually carries through on his threat the main losers will be the EU economies most exposed via goods exports to the US, notably Germany and Ireland.”
He added: “The UK economy will not be immune to the fallout from downturns in such close trading partners and from weaker sentiment generally, but the UK will be hit much less hard by an escalating US-EU trade war than if we had not left - an ongoing #Brexitbenefit ...
“This appears to be what the markets are thinking too - equities have recovered a little after an initial slump, but we are left with bigger falls in the EU than the UK.”
04:18 PM BST
EU has pledged to be tougher on China in US trade talks
For the European Union, a mutually beneficial framework agreement with Washington is the way out of Donald Trump’s trade tussle with Brussels.
Eurocrats have offered a deal that would see tariffs on industrial goods slashed to zero alongside a reduction in levies on some agricultural products, including a symbolic overture on lobster.
Diplomats have revealed the draft offer includes plans to boost purchases in strategic sectors, such as 5g and 6g mobile networks and energy.
There would also be a concerted effort to work more closely on strategic industries, like steel, aluminium, semiconductors and electric vehicles.
In terms of addressing Mr Trump’s concerns over non-tariff barriers, Brussels has suggested it could review its paperwork demands on US products, especially agricultural.
Most importantly, the EU was prepared to be tougher on China in the hope of securing a tariff reprieve from Mr Trump, including hitting Beijing with harsher tariffs.
But what the EU won’t do is consider scrapping taxes on digital companies, scrapping VAT or easing regulations on US tech firms.
04:12 PM BST
European shares drop sharply
European shares dropped sharply this afternoon after Donald Trump cranked up threats of tariffs on the European Union, reigniting fears of the economic damages caused by trade wars.
“This latest threat is worse than the worst case scenario,” said Fiona Cincotta, senior market analyst at City Index.
The pan-European Stoxx 600 index fell by as much as 2.3pc.
The Euro Stoxx volatility index - a measure of fear in the European markets - spiked to its highest in more than four weeks.
In Germany, the Dax is currently down 1.5pc, while France’s Cac 40 is down 1.8pc. The FTSE 100 is doing rather better, down by just 0.3pc and the mid-cap FTSE 250 is 0.6pc lower. Mr Trump agreed a trade deal with the UK earlier this month.
04:05 PM BST
Dollar set for for worst week since tariffs sell-off
The dollar has fallen more than 0.6pc today and is on track for its worst week since the initial “liberation day” sell-off.
The dollar index, which measures the greenback against a basket of currencies, has dropped 1.4pc this week amid worries about the US economy.
Bond markets have been under pressure this week from rising concerns about Donald Trump’s tax cuts and the US government’s ballooning debt pile. It came after credit rating agency Moody’s lowered the US’s credit rating.
Michael Hartnett, a Bank of America strategist, told Bloomberg that the Trump administration was likely to take note of warnings from bond vigilantes, who are “incentivised to punish the unambiguously unsustainable path of debt and deficit”.
03:52 PM BST
Volvo says US customers must pay for rising tariffs
Volvo Cars boss Hakan Samuelsson has said that its American customers would have to pay more to cover tariff hikes, even though the US president has repeatedly said foreign producers pay the cost.
Donald Trump has said he is recommending a 50pc tariff on goods from the European Union starting from June 1, claiming that the EU has been hard to deal with on trade.
Mr Samuelsson told Reuters that a 50pc tariff would limit the ability of Volvo to sell its Belgium-made EX30 electric vehicle in the US.
“That would of course be almost impossible,” he said, adding that given the fluid nature of the tariff threat he would not speculate further.
The EX30, which Samuelsson said was “very severely hit”, by tariffs because it was initially produced in China, has been Volvo’s attempt at providing its customers with an affordable electric car.
With a planned starting price of $35,000 (£25,900), hefty tariffs imposed on cars made in China led Volvo to delay selling the car in the US market until production started in Ghent, Belgium, which happened in April of this year. The car’s starting price is now at $46,195.
Shares in the car company are down 4.5pc.
03:40 PM BST
French trade minister criticises Trump tariff threat
French trade minister Laurent Saint-Martin has said that Donald Trump’s threat of new tariffs against the EU are not helping trade negotiations.
Mr Saint-Martin wrote on X: “Trump’s new threats of tariff increases are not helping during the negotiation period between the European Union and the United States.
“We maintain the same line: de-escalation but are ready to respond.”
03:34 PM BST
Trump ‘nowhere near’ finishing his trade war, say economists
Donald Trump is “nowhere near” striking large numbers of trade deals, but the economy will limit his power to wage a prolonged trade war, economists have said.
Carsten Brzeski and Inga Fechner, of ING, said: “A relatively calm week ends with a huge bummer and a reminder to markets that we are nowhere near many ‘beautiful trade deals’ or a return to normality. Volatility is back. And just to be sure, if fully implemented, 50pc US tariffs on European products would shave off some 0.6pp of GDP growth and bring the eurozone economy close to recession danger ... it would also increase stagflationary pressures in the US again.
“At the current juncture, it doesn’t make sense to speculate on the outcome of these trade tensions. Everything is possible, from deal to further escalation.
“We stick to our long held view that eventually the economic impact of an escalating trade war on the US economy will be so severe that it is impossible to maintain elevated tariffs for a longer time period.”
03:24 PM BST
Wall Street hit in run-up to holiday weekend
Traders might have hoped for a quiet Friday on Wall Street ahead of a US public holiday to mark Memorial Day on Monday.
Steve Sosnick, chief market analyst at Interactive Brokers, said: “Opening more fronts on the trade war was exactly what traders, hoping for a quiet end to a pre-holiday weekend, did not need and it clearly caught most off guard.
“It’s not clear what prompted these statements, but they are emblematic of the type of volatility that we should always be prepared for.”
Stocks are down on both sides of the Atlantic, with the S&P 500 currently down 1pc, the Dow Jones down by 0.9pc and the Nasdaq down by 1.2pc.
Wall Street’s “fear gauge”, the Vix is up 13.5pc today.
03:09 PM BST
International Chamber of Commerce calls for de-escalation
John Denton, secretary general of the business group, warned a worsening trade war would cause companies to cut investment and disrupt essential supply chains.
He said:“The transatlantic relationship is not only of immense economic importance — it is, in many ways, the cornerstone of the rules-based global trading system.
“For decades, EU-US trade has set an important standard for openness, reliability and shared prosperity. A sharp escalation in tariffs between two central pillars of the global economy risks sending shockwaves through the global business community at a time when stability is at an absolute premium.
“We call on the US and EU to redouble ongoing efforts to renew their trade relationship. A swift and coordinated de-escalation is essential to preserve the trust and stability that underpin international commerce, business investment and job creation.”
03:03 PM BST
Bessent says Brussels keeping European nations in the dark in trade negotiations
Scott Bessent, the US Treasury Secretary, has hit out at the “quality” of the EU’s proposals on trade, and claimed that European countries are being left in the dark by Brussels negotiators.
He told Fox News: “The 90-day pause on the April 2 tariffs was based on countries or trade blocs coming to us and negotiating in good faith. And I believe the president believes the EU proposals have not been of the same quality as we’ve seen from our other important trading partners.
“I’ve said there are 18 important trade deals that we have to do. I’m working mostly on Asia and that group has moved forward with some very interesting proposals, negotiating in good faith. We’ve already inked a deal with the UK. I think there are a couple more coming in the near future, so I think [Mr Trump’s suggestion of higher tariffs on the EU] is in response to the EU’s pace.”
He added: “I would hope that this would light a fire under the EU because … the EU has a collective action problem here. It’s 27 countries but they’re being represented by one group in Brussels, so some of the feedback I’ve been getting is that some of the underlying countries don’t even know what the EU is negotiating on their behalf.”
02:59 PM BST
Bond yields fall sharply as investors flock to safety
British and European bond yields have fallen sharply as investors seek out stability following Donald Trump’s tariff announcement.
The yield on 10-year gilts fell to around 4.7pc, while French and German 10-year yields fell to 3.25pc and 2.56pc respectively on Friday afternoon.
It comes as fears of further trade chaos sent shockwaves through the public markets, hammering stock prices on both sides of the Atlantic.
02:45 PM BST
Wall Street opens sharply down after Trump tariff threats
US stock markets opened down this afternoon after Donald Trump threatened higher tariffs on the EU again and against Apple’s made-in-India iPhones.
The benchmark S&P 500 dropped 0.9pc, while the Dow Jones lost 0.8pc. The tech-heavy Nasdaq fell 1.1pc. Apple lost 2.3pc.
Mr Trump has dialled back or paused many of his tariff threats in recent weeks. This brought some peace to markets which had been swinging wildly for weeks as the US president fired off tariff threats.
02:33 PM BST
German foreign minister: Trump’s threats help nobody
Johann Wadephul, the German foreign minister, said Donald Trump’s threats ‘help nobody’, as he vowed to back the EU in its discussions with Washington.
Mr Wadephul was speaking alongside his Indian counterpart on Friday. He added that he hoped the EU would be able to agree a trade deal with India by the end of 2025.
02:25 PM BST
Apple ‘in the eye of the tariff storm’
Here’s Ben Barringer, global technology analyst at investment firm Quilter Cheviot on the precarious situation Apple finds itself in:
“Apple has been at the eye of the tariff storm ever since Donald Trump announced his intentions on global trade. The tech giant has a deeply ingrained supply chain in Asia, and that is going to be very difficult for it to extricate itself from.
“Indeed, Apple hoped it could get around the worst of the tariffs by shipping iPhone products to the US from India and Vietnam. Unsurprisingly the US administration has not looked kindly on such tactics and is now threatening new tariffs.
“Given the deal with China, Apple will have been hoping that tensions with the US government would begin to ease, but this has appeared to be a false dawn.
“To date, Apple have said it is not seeing any stockpiling or pull forward of sales, as well as no change to its pricing strategy. Given the renewed rhetoric coming from Trump, this position may need to change, and greater consideration given to either upping prices, moving supply chains or ultimately both.”
02:22 PM BST
‘Trump is right, the EU act like bullies’
Richard Tice, deputy leader of Reform UK, said: “Trump is right, the EU do act like bullies, and thank god we had the common sense to leave them so that we can do our own trade deals.
“This reiterates why Starmer’s surrender deal with the EU is so catastrophic. Reform UK will repeal all of that terrible surrender deal.”
02:19 PM BST
Germany and Ireland face ‘substantial’ blow to GDP
Threats by Mr Trump to impose a 50pc tariff on EU nations could cause German GDP to be about 1.7pc smaller than it otherwise could have been, while Ireland faces a comparative 4pc hit, economist have warned.
Capital Economics said: “But if it were implemented it could result in a substantial fall in GDP in Germany and potentially even higher in Ireland if pharmaceuticals were included.
“If he followed through on this threat and the EU were unable to negotiate a reversal or pause fairly soon, our tariff impact model suggests that a blanket 50pc tariff would cause German GDP be around 1.7pc smaller than it would otherwise have been after three years.
“The hit is smaller for Italy (1.25pc) France (0.75pc) and Spain (0.5pc) but much higher for Ireland, assuming pharmaceuticals are included (4pc).
“As this assumes no second-round and uncertainty effects – which could be substantial with such a huge tariff – the impact could probably be much worse: indeed, the effect of tariffs is probably “non-linear” given that small frictions can more easily be absorbed by producers and consumers.
“Our calculations also assume no retaliation whereas in practice the EU would surely be likely to respond. That said, European policymakers would presumably also offer some fiscal and perhaps monetary support for the economy.”
02:15 PM BST
EU plans $21bn retaliatory tariff hit
EU member states have signed off on a €21bn (£17.6bn) package of retaliatory tariffs of up to 50pc on certain products.
The list of US goods include wheat, motorcycles in a nod to the iconic Harley Davidson and clothing, a further nod to Levi’s jeans, although these won’t be hit because they’re no longer made in the country.
A much larger list worth €95bn (£80bn) is waiting in the wings as the European Commission and member states wrangle over possible targets.
The more punishing measures include targeting Boeing aircraft, cars and Bourbon whiskey.
Brussels has always favoured striking items of cultural significance in the US, and products that will trigger an emotive response from people whose jobs depend on their production in the country.
01:55 PM BST
Serious threat or dealmaking manoeuvre?
Markets are reacting quickly and anxiously to Donald Trump’s latest social media post, writes Hans van Leeuwen. But by saying only that he is “recommending” this 50pc tariff on the EU, has the president left himself some wriggle room?
It has been widely reported in recent days that Washington is frustrated with the EU’s offer on trade, as the two sides negotiate a permanent truce to replace the 90-day tariff ceasefire.
The Truth Social post could just be a classic Trump dealmaking move -- ratchet up the pressure to maximum, in the hope the other side caves quickly and heavily.
US trade envoy Jamieson Greer is talking to EU Trade Commissioner Maros Sefkovic later today, and this is useful leverage. If it works, there’s still scope for Trump to dial back.
But it’s a powerful threat. Trump has a well-telegraphed, longstanding and unshakeable animus towards the EU. He says the bloc is a deliberately engineered pot against America, and he recently described it as “nastier than China”. That backdrop makes it difficult even for seasoned Brussels negotiators to see this move in purely tactical terms.
01:52 PM BST
‘Prolonged’ trade war on the cards
Here’s Kathleen Brooks, research director at broker XTB:
“Is the president using tariffs as another negotiating tactic, to force the EU to cede to his demands? Or is this a sign that negotiations since mid-April have failed, and we should expect tit for tat threats from the EU later today?
01:42 PM BST
Oil price slumps amid trade war escalation
Oil prices have dropped following Donald Trump’s threats to hit the EU with 50pc tariffs.
Brent crude fell below $64 per barrel, capping off a week of declines that has seen it fall by around 3pc.
The prospect of an escalating trade war between the US and EU, which would potentially dampen demand, comes as the Opec cartel has been steadily increasing production.
Ole Hansen, head of commodities strategy at Saxo Bank, said: “Crude prices dropped a dollar with risk sentiment taking a knock after Trump once again grabbed his phone and started spewing threats about raising tariffs on Europe.”
01:38 PM BST
Wall Street poised for plunge after tariff shock
US stock indexes dropped heavily in premarket trading after Donald Trump announced 50pc tariffs on the European Union.
Trading activity had been expected to be thin on Friday ahead of US Memorial Day on Monday, when markets will be shut.
That could all change after the US president recommended the higher tariffs on the EU starting on June 1.
The Vix index, also known as Wall Street’s fear gauge, spiked to its highest level in two week as Trump also warned he would make Apple pay tariffs if it does not starting making iPhones in the US. The tech giant’s shares sank by around 4pc ahead of the opening bell.
In premarket trading, the Dow Jones Industrial Average was down 1.3pc, the S&P 500 dropped 1.5pc and the Nasdaq 100 was lower by 1.9pc
01:35 PM BST
Britain ‘could be caught in the crossfire’
Britain could be “caught in the crossfire” of a US-EU trade war, former Conservative European parliamentarian and Brexit advocate Daniel Hannan has warned.
“Such tariffs will hurt the US, the EU and the UK. US-EU trade is worth around $1 trillion, and impeding it will have negative consequences for the entire world,” he posted on X.
“To say ‘Brexit benefit’ is beside the point. Even if we are not hit ourselves, we will be caught in the crossfire.”
01:34 PM BST
Déjà vu?
Market watchers are finding Friday’s turmoil eerily familiar.
01:29 PM BST
European car manufacturers plunge on tariff news
German car giant Volkswagen’s share price fell by more than 4pc in the wake of Mr Trump’s announcement. BMW, meanwhile, was down more than 4.5pc at 1:29pm.
01:23 PM BST
Tariffs will only embolden EU chiefs
Donald Trump’s imposition of a 50pc tariff will do little to convince Brussels that it should be kinder to the US on trade.
A handful of EU capitals had already blocked the possibility of offering to unilaterally reduce tariffs on US goods, a key demand from Mr Trump.
Member states instead suggested that even an offer akin to the UK-US trade deal, which mostly reduced tariffs to 10 per cent, should be met with retaliatory measures.
The latest tariffs will only embolden hardline EU leaders demanding a harsh response to the US President’s trade threats.
01:18 PM BST
US borrowing costs ease after Trump’s EU tariff threat
Donald Trump’s threat to impose 50pc tariffs on the EU sent the cost of US borrowing down sharply as investors fled to the safety of government bonds.
Investors had been looking nervously at bond markets this week as longer-term debt costs ticked higher in the run-up to the passing of the US president’s tax-cutting “big beautiful bill” by the House of Representatives on Thursday.
The US 30-year bond yield had hit its highest level in 18-months over concerns that the $36 trillion American debt pile was becoming unsustainable.
However, Mr Trump’s post on Truth Social on Friday has caused a swift reversal in that trend.
The 30-year government bond yield was last down more than five basis points below the symbolic level of 5pc as investors again began buying US Treasuries, which are considered a safe haven during times of turmoil.
The yield on bonds tends to fall as higher demand sends prices higher, meaning the US Treasury is able to offer lower returns to buyers of its debt and thus lower the long-term cost of government borrowing.
01:15 PM BST
EU and US talks to take place on Friday evening.
The European Commission’s trade chief, Maros Sefcovic, is due to hold talks with his American opposite number, Jamieson Greer, at 5.30pm local time (Brussels).
Sources say Mr Sefcovic wants to hear news on the 50 per cent tariffs from the horse’s mouth, rather than a social media post.
01:10 PM BST
Trump threatens 25pc tariffs on Apple
Donald Trump has also threatened to hit Apple’s iPhones with fresh tariffs if the technology giant fails to shift manufacturing to the US, a move that could increase the price of the smartphones by hundreds of dollars.
The Republican said he would add import duties of 25pc to any iPhones built overseas. “I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States,” Mr Trump said, “not India, or anyplace else.”
“If that is not the case, a tariff of at least 25pc must be paid by Apple to the US,” he added in a post on Truth Social.
Apple’s phones are mostly built in China by its Taiwanese supplier, Foxconn, but the long-running trade disputes between the US and Beijing have prompted it to shift production elsewhere. It currently has plans to make the majority of its phones sold in the US in India.
However, White House officials have repeatedly raised the prospect of a “Made in America” iPhone, despite the fact such a handset would cost thousands of dollars more than current models.
Dan Ives, a technology analyst at Wedbush Securities, said a US-made iPhone was a “fairytale concept”. “Paying a 25pc tariff from India would put Apple in a very difficult situation and would likely have to pass higher prices to consumers,” he said.
Smartphones are currently exempted from Mr Trump’s most punishing tariffs on China.
01:07 PM BST
Traders bet on rate cuts as Trump threatens tariffs
Traders have increased bets on interest rate cuts by the European Central Bank after Donald Trump threatened to impose 50pc tariffs on the EU.
Money markets now indicate there will be three cuts in the eurozone before the end of the year.
Traders had favoured just two reductions before the US president’s post on Truth Social.
The ECB would likely need to cut interest rates to support growth in the US economy, which would be hampered by higher tariffs from the US.
01:06 PM BST
European stocks drop as Tariffs announced
The pan-European Stoxx 600 index has now dropped by more than 1pc in the wake of Donald Trump’s Truth Social post.
The French benchmark CAC 40 index is down more than 1.35pc in the wake of the post, with losses of more than 2.3pc over the day so far.
The German DAX is down more than 1.54pc in the wake of the post, with losses of more than 2.1pc on Friday in total as of the early afternoon
01:03 PM BST
FTSE 100 drops sharply as Trump announces tariff plans
The FTSE 100 dropped by more than 1.15pc in the wake of Donald Trump’s Truth Social post, as investors panicked at the prospect of steep tariffs on the EU.
The mid-cap FTSE 250, meanwhile, fell by almost 1.4pc.
12:57 PM BST
Trump to impose 50pc tariffs on EU
Donald Trump has posted on Truth Social that he plans to impose a 50pc tariff on the European Union.