European Markets React to Trump's Global Tariff Threats

European shares hit a two-month low as investors sought safer assets following U.S. Trump's global tariff proposals. The STOXX 600 index dropped amid fears of worldwide economic slowdown. Investors brace for reciprocal tariffs, impacting GDP forecasts and central bank rate predictions.

European shares reached a two-month low on Monday as investors retreated from risky positions following U.S. President Donald Trump's announcement of tariffs targeting all nations, raising fears of a global economic downturn.

The pan-European STOXX 600 index declined by 0.8% as of 0802 GMT, marking its fourth consecutive session of losses. The region's volatility index hit a two-week high, while Wall Street futures indicated a lower opening. Trump's recent comments led investors to seek refuge in gold and the Japanese yen.

Analysts expect retaliatory tariffs from U.S. trade partners starting April 2, after Trump's tariffs on aluminum, steel, and autos, including heightened tariffs on Chinese goods. The aggressive tariff environment led Goldman Sachs to lower its GDP forecasts for the U.S. and euro area. Traders are now anticipating a 65 basis point rate cut from the ECB by the end of 2025, up from last week's 61 basis points prediction.

(With inputs from agencies.)