Stock markets plunge after Trump reignites trade war risk with threat of 50% tax on EU goods

Stock markets have dropped sharply after US president Donald Trump reignited fears of a trade war by threatening to impose high tariffs on the EU and smartphone giant Apple.

European shares fell 1.7 per cent, the US S&P 500 fell 1.2 per cent in early trading and the tech-heavy Nasdaq fell 1.5 per cent.

Mr Trump threatened to impose a 50 per cent tax from next month on all imports to the US from the EU, including on pharmaceuticals and luxury items.

He also warned Apple of a 25 per cent tariff on any iPhones manufactured outside the United States but sold there.

“This latest threat is worse than the worst-case scenario,” said Fiona Cincotta, senior market analyst at City Index.

In early April, Mr Trump unveiled high tariffs on nearly every country in the world, with a minimum of 10 per cent.

The pan-European STOXX 600 index had fallen 1.9 per cent by early afternoon on Friday, and was on course to record a weekly fall for the first time in five weeks.

The Euro STOXX Volatility index spiked to its highest in more than four weeks.

Stock indexes in France, Spain and Italy were down between 2.3 per cent and 2.8 per cent.

The UK’s blue-chip FTSE-100 was down by 0.6 per cent after recovering slightly from a steeper drop.

The German DAX fell 2.1 per cent, after rising close to an all-time high earlier in the day, on economic news.

Shares in German carmakers and luxury companies, some of the most exposed to tariffs, fell. Porsche, Mercedes and BMW were down more than 4 per cent just after noon.

Government bonds in the US and Europe rallied, however, as the assets suddenly found favour with haven buyers.

The US president falsely claimed on his Truth Social network: “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with.”

He earlier announced that Apple would be hit with 25 per cent tariffs if phones sold in the US were not made there, sending the iPhone maker's shares down almost 4 per cent in pre-market trading.

The EU Commission declined to comment, saying it would wait for a phone call between EU trade chief Maros Sefcovic and his US counterpart Jamieson Greer later.

Dutch prime minister Dick Schoof said he expected a calm and robust response from the EU.