Visions of deregulation and tax reform initially caused a stock market surge in November 2024 upon news of President Donald Trump’s re-election, with the Dow Jones, S&P 500, and Nasdaq Composite all posting substantial gains.
However, since the president took office, the market has been on a bumpy ride. And there’s one big reason why: Tariffs.
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Trump has followed through on his campaign promise to try to bring manufacturing back to America by threatening, and in some cases, imposing, steep tariffs on foreign imports.
The markets have, on the whole, not reacted positively to these new taxes on imported goods, but things had been looking up as the President touted preliminary trade deals with the UK and China while also appearing to backtrack on some unpopular proposals, including a threatened 100% tariff on films produced outside the U.S.
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Now, however, threats of steep new tariffs on EU imports on Friday, May 23, 2025, have sent EU and European stock prices tumbling, and the value of the dollar falling.
President Trump threatens massive tariff on the EU
Trump made the startling new tariff threat in a post on Truth Social.
His post said, in part, “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…Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025.”
In his post, the president cited a “trade deficit” of more than $250 million per year as justification for his actions, “a number which is totally unacceptable.”
He also went on to state that no tariffs would apply to products built or manufactured within the United States.
Will Trump’s threatened tariff go into effect?
With just days before Trump’s new proposed tariff would go into effect, reports indicated there is uncertainty among White House officials and EU leaders regarding whether the Truth Social post is an official policy proposal.
The post may be part of a broader negotiation strategy as trade talks continue, especially as the president and U.S. Treasury Secretary Scott Bessent have expressed dissatisfaction with the EU during the ongoing negotiations.
In fact, in a Fox News interview on Friday (May 23) morning, Bessent hinted that the goal was to encourage better proposals from EU officials, stating, “I would hope that this would light a fire under the EU.”
Trump, however, sent mixed messages on his willingness to continue negotiations when answering questions during an executive order signing on Friday afternoon.
Related: Secretary Bessent sends message on Walmart price increases due to tariffs
When asked if he was interested in reaching a deal in the nine days before the 50% tariff would take hold, the president made clear, “I’m not looking for a deal… “I mean, we’ve set the deal. It’s at 50%.” Yet, he also said that “If somebody comes in and wants to build a plant here, I can talk to them about a little bit of a delay.”
For their part, leaders of EU countries appeared disstressed by the president’s announcement Friday, with Irish Prime Minister Micheál Martin posting a message on X that he found the threat “enormously disappointing.”
French Trade Minister Laurent Saint-Martin stated that the President’s comments “do not help at all during the negotiation period between the European Union and the United States.”
The stakes are high, as the EU already threatened a $108 billion reciprocal tariff on the U.S. earlier this month if trade negotiations are unsuccessful. Since the Office of the U.S. Trade Representative reports that the European Union is the second-largest purchaser of U.S. goods, the economic consequences could be catastrophic if the 50% tariff or reciprocal taxes go into effect.
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Regardless of whether that happens or not, the markets are reacting badly to the uncertainty, especially as President Trump’s announcement of a 50% tariff came less than 30 minutes after threatening Apple with a 25% tariff if it did not move the manufacturing of the iPhone to the U.S.
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