Trump re-escalates trade war, threatens EU, Apple with new tariffs, shaking global markets

U.S. President Donald Trump reignited trade tensions on Friday by proposing a 50% tariff on European Union goods starting June 1, and threatening to impose a 25% tariff on iPhones manufactured outside the United States.

The announcement, made via social media, disrupted global financial markets that had recently found some calm. The S&P 500 dropped 1.2% in early trading, the Nasdaq fell 1.5%, and European stocks declined 1.7%.

Germany’s auto and luxury sectors were among the hardest hit. Shares in Porsche, Mercedes, and BMW fell between 2% and 4.5%. French eyewear giant EssilorLuxottica saw its stock drop 5.5%. Apple shares also fell 3.7% in premarket trading, along with other major tech firms, as uncertainty around the potential iPhone tariffs mounted.

Trump accused the EU of exploiting the U.S. in trade negotiations, stating on Truth Social, “The European Union... has been very difficult to deal with. Our discussions with them are going nowhere!”

The European Commission declined to comment on the tariff threat ahead of a scheduled call between EU trade chief Maros Sefcovic and U.S. counterpart Jamieson Greer. EU envoys also planned to meet in Brussels on Friday to discuss the issue. The EU exported about €500 billion worth of goods to the U.S. last year, with Germany, Ireland, and Italy leading in volume.

Kathleen Brooks, research director at XTB, said, “Trump’s tense relationship with EU leaders increases the likelihood of a prolonged trade conflict.”

Germany’s car manufacturers are especially vulnerable, with limited capacity to shift production quickly. Porsche and Audi, for example, currently have no U.S. manufacturing facilities. Volvo and other automakers have started relocating some production in anticipation of potential tariffs.

Volvo CEO Hakan Samuelsson told Reuters that increased costs would be passed to consumers and warned that it might become unfeasible to sell smaller vehicles in the U.S. However, he expressed optimism about a potential deal: “It could not be in the interest of Europe or the U.S. to shut down trade between them.”

Optimism Quickly Fades

Markets had rallied in recent weeks as earlier tariff threats were temporarily paused. In April, Trump imposed broad tariffs, including a 145% tax on Chinese imports, triggering investor panic and a selloff in U.S. assets. While some levies were later suspended, tariffs of 10% on most global imports and 30% on Chinese goods remained in place.

Despite ongoing negotiations, progress has been slow. G7 finance leaders tried to minimize trade tensions at a recent summit in Canada, but Friday’s developments erased recent gains. “All the optimism over trade deals wiped out in minutes – seconds, even,” noted market analyst Fawad Razaqzada.

Apple in the Crosshairs

Trump singled out Apple, warning CEO Tim Cook that iPhones sold in the U.S. must be produced domestically or face a 25% tariff. While it’s unclear if such a company-specific tariff would be legally enforceable.

Apple currently produces the majority of its iPhones in China but plans to shift a large portion of production to India by 2026 to mitigate future tariff risks. In February, the company announced a $500 billion investment over four years in U.S. operations, though no commitment was made to move iPhone production stateside.

“It is hard to imagine that Apple can be fully compliant with this request from the president in the next 3-5 years,” said D.A. Davidson analyst Gil Luria.

The renewed trade threats have injected fresh uncertainty into global markets, reviving fears of a protracted U.S.-EU trade war and further pressure on multinational companies.