On Friday, former President Donald Trump renewed his threats of escalating the trade dispute with the European Union. He proposed a steep 50% tariff on EU goods starting June 1 and warned Apple that it might face a 25% tariff on any iPhones made outside the United States.
These dual threats unsettled global markets just when they had shown signs of stability after a period of easing tensions. In early trading, the S&P 500 dropped by 1.2%, the Nasdaq fell by 1.5%, and European stocks dipped by 1.7%.
As a result of the news, shares in German automakers and luxury brands, which are particularly vulnerable to tariffs, took a hit. Companies like Porsche, Mercedes, and BMW saw their stocks decline between 2% and 4.5%, while Eyewear giant EssilorLuxottica’s shares dropped 5.5%.
Apple’s stock fell by 3.7% in pre-market trading, along with other leading tech firms. Trump did not specify a timeline for his warning to Apple. The U.S. market sees more than 60 million phone sales yearly, but it lacks domestic smartphone production.
“The European Union, which was created mainly to exploit the United States in trade, has been incredibly challenging to negotiate with,” Trump expressed on his Truth Social platform. “Our discussions with them are going nowhere!”
The European Commission chose not to address the proposed 50% tariff on Friday, indicating it would wait for a conversation between EU trade chief Maros Sefcovic and U.S. counterpart Jamieson Greer.
Trade envoys from the 27 EU nations are scheduled to meet in Brussels later in the day.
Last year, the EU’s total exports to the United States reached approximately 500 billion euros, with Germany, Ireland, and Italy being the largest exporters. Major export categories included pharmaceuticals, automobiles, auto parts, chemicals, and aircraft, according to EU stats.
“The EU is not one of Trump’s preferred regions, and his relationship with its leaders seems strained, raising the likelihood of a prolonged trade war,” said Kathleen Brooks, research director at XTB.
Export-driven automakers in Europe, particularly in Germany, are heavily affected and have limited options in the short term other than offering smaller discounts or raising prices.
Neither Porsche nor Volkswagen’s Audi have any production facilities in the U.S. Some companies, including Audi and Volvo Cars, have already indicated plans to shift some manufacturing.
Volvo Cars CEO Hakan Samuelsson told Reuters that customers might bear most of the tariff-related costs, and importing the company’s smallest models to the U.S. could become unfeasible. However, he remains optimistic about a forthcoming agreement between Europe and the United States.
“I believe a deal will be reached soon. It wouldn’t be in the interest of either Europe or the U.S. to halt trade,” Samuelsson remarked.
Disappointment Over Trade Prospects
In early April, Trump rattled the markets after imposing tariffs on a wide range of imports worldwide, including a hefty 145% tax on goods from China. Investors reacted by rapidly selling off U.S. assets, further questioning America’s traditional safe-haven status. Although markets have somewhat rebounded, both business and consumer confidence have declined sharply in the U.S.
The backlash compelled the White House to pause most tariffs until early July, maintaining a 10% tax on imports from other countries and 30% on many Chinese goods while leaving open the possibility of reinstating certain levies.
The White House is negotiating with several nations over trade matters, although progress has been inconsistent. Leaders from the Group of Seven industrialized countries attempted to downplay tariff concerns at a recent meeting in the Canadian Rockies.
“All the optimism surrounding trade deals vanished in the blink of an eye — or even in just seconds,” remarked Fawad Razaqzada, a market analyst at City Index and FOREX.com, in a note on Friday.
Targeting Apple
“I have long informed Tim Cook of Apple that I expect iPhones sold in the United States to be manufactured domestically, not in India or elsewhere,” Trump stated in a Truth Social post on Friday, addressing Apple’s CEO.
“If this doesn’t happen, Apple will have to pay at least a 25% tariff to the U.S.”
It’s uncertain whether a tariff directed at a specific company would face legal challenges. Apple declined to comment on Trump’s remarks.
To address market turmoil, the White House had previously granted exclusions from steep tariffs on smartphones and certain other electronics imported largely from China— a relief for Apple and other tech firms reliant on imported components.
Apple is aiming to manufacture most iPhones sold in the United States in India by the end of 2026, expediting those plans due to potential higher tariffs in China, its primary manufacturing hub, a source revealed to Reuters.
However, Trump and others, including Commerce Secretary Howard Lutnick, have suggested that Apple could produce iPhones within the U.S. In February, Apple announced a $500 billion investment over four years to expand hiring and facilities across nine states, though it did not specify that this would include bringing iPhone manufacturing to the U.S.
Apple stated that most of its smartphones sold in the U.S. would likely come from India by the June quarter.
“It’s hard to envision Apple being able to fully comply with this request from the President within the next three to five years,” said D.A. Davidson & Co. analyst Gil Luria.
