Markets aren’t buying Trump’s 50% EU tariff threat

European investors didn’t blink when Trump declared he was “recommending” a 50% tariff on every single import coming from the European Union, a threat he dropped Friday on Truth Social, right before US and EU officials were set to meet. The Stoxx Europe 600 index closed down just 1%, shaking off the news like a mild cold. That’s a soft reaction compared to the sharp losses—between 2.5% and 5%—markets suffered back in April when Trump posted similar threats during what he called “Liberation Day.” According to CNBC, most analysts think this latest escalation isn’t a policy ready to launch, but a negotiating bomb designed to scare Brussels into giving Washington more ground in upcoming talks. The language Trump used and the timing of his post both fueled that theory. He didn’t say the US would impose the tariff. He said he was recommending it. There’s a difference, and Ajay Rajadhyaksha, global chair of research at Barclays, pointed it out. “We believe that this morning’s social media posts about a 50% tariff on the EU are primarily a negotiating tactic,” Ajay wrote to clients. He also said “we are guessing here—as is everyone else—but we remain of the belief that the 50% tariff on all EU goods on June 1 won’t actually go ahead.” Economists doubt Trump will go all the way Even so, Ajay admitted the final number could still surprise markets. He had earlier forecasted 14% to 17% average tariffs. Now, he says that was probably too low. “The EU will not end up with 50%, we think, but it now seems the continent could end up with (say) 20%,” he said. Andrew Kenningham, chief Europe economist at Capital Economics, said something similar. He called the 50% tariff “very unlikely to be where tariffs settle over the long run,” and made it clear the risk wasn’t zero. Andrew warned that if the full tariff ever happened, Germany’s GDP could shrink by 1.7% in just three years. And if the tax hit the pharmaceutical sector, Ireland might be worse off. He still expects tariffs to land around 10%, but said the road to a final deal “could be rocky.” The math on the US side is just as bad. The United States brought in $606 billion in European goods last year. If Trump hit all of it with a 50% tax, the direct cost would land at $300 billion. Ajay ran the numbers and said that about 60% of the cost would fall on US buyers. That’s $180 billion that American consumers, not European firms, would pay. Ajay pointed to the 2018 trade war with China. “The US arguably saw this coming in the case of China and decided that it was too high a price to pay,” he said. “We think it unlikely that the US will be willing to risk a repeat, and this time with its largest trading partner.” Europe lines up its retaliation Europe isn’t just standing around. Inga Fechner, senior economist at ING, said the EU has already drafted retaliatory tariffs , and they’re scheduled to hit on July 14 if the White House pushes forward. Inga called Trump’s play “a prelude to negotiation,” similar to how he acted before announcing a short-lived deal with China earlier in May. But if talks collapse, Brussels has more than just tariffs ready. Inga warned the EU might tighten regulations on US tech, stall new licenses, block public procurement, and limit investment and IP access using the Anti-Coercion Instrument. And she said if Trump follows through, it could drag the eurozone’s GDP down by 0.6 percentage points, enough to push the bloc close to recession. Salomon Fiedler, an economist with Berenberg, said both sides would take heavy hits if the 50% tariff becomes real. He also said the added cost pressure could extend high interest rates in the US, because the Federal Reserve might delay any cuts. “Given the damage the US would do to itself with this tariff, he will probably not follow through,” Salomon added. But he said the threat itself was enough to lock in Trump’s 10% baseline tariff, which he’d already slapped on almost every trade partner. Your crypto news deserves attention – KEY Difference Wire puts you on 250+ top sites