European stock markets took a sharp dive at the open on Thursday, with a palpable sense of unease spreading across trading floors.
The pan-European Stoxx 600 index fell 0.42% shortly after trading began, as a stark drop in UK exports to the US underscored the real-world impact of trade tariffs, while confusing signals from Washington regarding a US-China trade deal further rattled investor confidence.
A significant contributor to the gloomy market mood was fresh data from the UK’s Office for National Statistics (ONS), which revealed a staggering £2 billion ($2.71 billion) plunge in UK goods exports to the US in April.
This represents the biggest monthly drop since records began in 1997, pushing the value of these exports to its lowest level since February 2022.
The ONS directly stated that the shift was “likely linked to the implementation of tariffs on goods imported to the United States.”
This sharp decline in UK exports comes despite the UK and US having announced the outline of a trade deal at the start of May.
However, that agreement still imposed 10% blanket tariffs on British goods sent stateside and has not yet been fully implemented, leaving 25% duties on crucial sectors like steel, aluminum, and autos.
Adding to the bleak trade picture, US imports to the UK also fell by £400 million for the month.
Overall, the UK’s trade deficit in goods widened by £4.4 billion to £60 billion in the three months to April, while its trade surplus in services dipped by £500 million to £48.5 billion.
The travel sector led the sectoral declines across Europe, down 1.5%, as almost all segments found themselves in the red.
US-China trade deal: confusion reigns after Trump’s tariff claims
Global market confidence, which had seen some apparent progress in trade talks between the US and China, seemed to falter somewhat overnight.
Asia-Pacific markets traded in mixed territory, and US stock futures pointed lower as investors tried to decipher conflicting messages from the Trump administration.
President Donald Trump declared in a post on Truth Social earlier Wednesday that a trade deal with China was “done”, stating, “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%.”
However, this claim was later contradicted by Commerce Secretary Howard Lutnick, who said that US levies on goods from China would not change from their current levels.
The deal still requires official approval from both President Trump and Chinese President Xi Jinping, leaving its status and terms uncertain.
UK economic data disappoints; chancellor vows growth focus
Adding to the downbeat sentiment, the latest UK GDP figures also underwhelmed. Data showed the economy shrank by 0.3% in April on a monthly basis.
UK Chancellor Rachel Reeves acknowledged this, describing the print as “clearly disappointing.”
“Our number one mission is delivering growth to put more money in people’s pockets through our Plan for Change, and while these numbers are clearly disappointing, I’m determined to deliver on that mission,” she said in a statement out Thursday.
Reeves pointed to the spending review she delivered to lawmakers on Wednesday, which laid out expenditure and investment plans for all government departments for the next few years, as evidence of the Treasury’s ambition to deliver jobs and growth.
“Whether that’s improving city region transport, a record investment in affordable homes or funding Sizewell C nuclear power station. We’re investing in Britain’s renewal to make working people better off,” she commented.
Trade tensions top investor worry list
The current market anxiety underscores a broader trend. Mounting trade tensions and tariffs have now become the single biggest worry for global investors, overshadowing all other economic risks, according to a new survey published by British investment manager Schroders.
The survey found that nearly two-thirds (63%) of institutional investors and wealth managers identified trade levies as the most significant macroeconomic concern impacting their investment strategy.
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