DAX Tumbles 2.7% as President Trump Sets Tariff Deadline for EU

President Trump Reignites Tariff Discussion

US President Donald Trump just reignited market volatility with a series of tweets and comments around tariffs.

The President posted to his Truth Social platform that tariffs of at least 25% would be put in place for iPhones not made in the US. The move sent the S&P 500 lower but the comments on EU tariffs really hampered risk sentiment and risk assets.

In a separate Truth Social post, President Trump criticized the European Union, accusing it of engaging in unfair trade practices that have contributed to a significant trade deficit with the United States. Highlighting issues such as trade barriers, VAT taxes, and corporate penalties, Trump expressed frustration over stalled negotiations with the EU.

In his post, Trump stated:
"The European Union has been very difficult to deal with. Their powerful Trade Barriers, VAT Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans Companies, and more, have led to a Trade Deficit with the US of more than $250,000,000 a year, a number which is totally unacceptable. Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States. Thank you for your attention to this matter!"

The proposed 50% tariff, set to take effect on June 1, 2025, would exempt products manufactured within the United States, signaling a push to encourage domestic production. This announcement is likely to spark significant debate and could have far-reaching implications for US-EU trade relations.

Market Reaction - DAX Falls 2.7%, S&P Down 1.5%

Risk assets have taken a hit with the Wall Street’s "fear gauge", the CBOE Volatility Index (VIX), spiked to a more than two-week high and was last at 24.6 points.

S&P 500 has tumbled 1.5% as megacap and growth stocks turned sharply lower, with Amazon (NASDAQ:AMZN) and Nvidia (NASDAQ:NVDA) sliding more than 2% each.

The DAX index slid as much as 2.7%.

This is what i would consider a major escalation in the tariff conversation. Markets had hoped that most of the proposed tariffs by the US administration would be negotiated away.

Concerns will now rise that if these tariffs are implemented, growth in the European Union may be affected. This comes after disappointing PMI data from the EU earlier this week.

Germany’s 2-Year bond yield fell 10 basis points to 1.73%, while the 10-year yield dropped 9 basis points to 2.55%.

In currency markets, the Japanese yen was the top performer, with the US dollar down 0.9% at 142.77 yen and the euro down 0.56% at 161.43 yen.

Gold saw renewed safe haven flows as the precious metal is tarding above the $3350/oz mark at the time of writing.

The euro was steadier against the dollar, rising 0.3% to $1.1311, as traders weighed U.S. tariff concerns against eurozone growth worries.

DAX Index Daily Chart, May 23, 2025

Source: TradingView.com

Support

• 23212
• 22800
• 22405

Resistance

• 23750
• 24000
• 24250

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