Trade War Turmoil: European Shares Plummet Amid Escalating Tariff Tensions

European shares faced significant losses after China raised tariffs on U.S. goods, following the U.S.'s own tariff hikes. Concerns of a recession grew amid the escalating trade war, leading to a sell-off in safe-haven assets and falling European stock markets, particularly affecting rate-sensitive banks and the healthcare sector.

European shares experienced deepening losses on Wednesday as China announced a sharp increase in tariffs on U.S. goods. This move came shortly after Washington unveiled a substantial 104% levy on Beijing, heightening worries about serious economic repercussions from the ongoing trade conflict. The STOXX 600 fell by 3.9% as the prior session's gains disappeared.

The Chinese Ministry of Finance revealed its plans to impose 84% tariffs on U.S. goods starting Thursday, significantly higher than the earlier announced 34%. By the end of the day, the European Union countries were set to endorse the bloc's first responses to U.S. President Donald Trump's tariffs, aligning with China and Canada in countering the U.S.'s 20% tariffs on select European goods.

As the tit-for-tat tariff measures spurred a global market rout and fears of a recession, even previously stable government bonds saw forced selling on Wednesday. Currently, the STOXX 600 is around 16.9% below its historic high, inching closer to the 20% decline mark that suggests a bear market. The market turmoil also affected European pharmaceutical giants, with significant drops in share prices, and energy stocks took a hit as oil prices fell to a four-year low.

(With inputs from agencies.)