Trump re-escalates trade threats, takes aim at European Union

US President Donald Trump threatened once again on Friday (May 23) to intensify his trade war, recommending a 50 per cent tariff on European Union (EU) goods starting Jun 1.

The twin threats, delivered via social media, roiled global markets after weeks of de-escalation had provided some reprieve. The S&P 500 fell 1.2 per cent in early trading, the Nasdaq fell 1.5 per cent, and European shares fell 1.7 per cent.

Shares in Germany's carmakers and luxury companies, some of the most exposed to tariffs, fell on the news. Porsche, Mercedes and BMW were down between 2 per cent and 4.5 per cent at 1.20pm (7.20pm, Singapore time). Sunglasses company EssilorLuxottica was 5.5 per cent lower.

"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," Trump wrote on his Truth Social site. "Our discussions with them are going nowhere!"

The EU Commission on Friday declined to comment the new 50 per cent tariff threat, saying it would wait for a phone call between EU trade chief Maros Sefcovic and his US counterpart Jamieson Greer at 3pm.

Envoys from the 27 EU countries are due to meet on trade in Brussels later on Friday.

Treasury Secretary Scott Bessent said on Friday that President Donald Trump does not believe that the EU's trade offers to the US are of sufficient quality and that he hopes that a Jun 1 50 per cent tariff threat will "light a fire under the EU" in negotiations with Washington.

Bessent told Fox News Channel that many other top US trading partners are negotiating in good faith with the exception of the EU.

EU's total exports to the US last year totalled about €500 billion (US$567 billion), with Germany (€161 billion euros), Ireland (€72 billion ) and Italy (€65 billion) the three largest exporters.

Pharmaceuticals, cars and auto parts, chemicals and aircraft were among the largest exports, according to EU data.

"The EU is one of Trump's least favourite regions, and he does not seem to have good relations with its leaders, which increases the chance of a prolonged trade war between the two," said Kathleen Brooks, research director at XTB.

Export-oriented car companies in Europe, most notably Germany's major automakers, are heavily exposed, with few near-term options other than smaller discounts and price increases.

Porsche and Volkswagen's Audi have no US production. Some, including Audi and Volvo Cars, have already said they will move some production.

Volvo Cars CEO Hakan Samuelsson told Reuters on Friday that customers would have to pay a large part of tariff-related cost increases, and that it could become impossible to import the smallest cars in the company's line-up to the United States.

But he remained hopeful that Europe and the US would soon come to an agreement.

"I believe there will be a deal soon. It could not be in the interest of Europe or the US to shut down trade between them," Samuelsson said.

OPTIMISM "WIPED OUT"

Trump had sent markets reeling in early April after imposing tariffs on almost every inhabited locale around the world, including a massive tax of about 145 per cent on imported goods from China.

Investors responded by furiously selling US assets, as the levies caused them to question the safe-haven status that America has long enjoyed, and while markets have recovered, business and consumer confidence has plunged in the US.

The shock response forced the White House to pause most tariffs through early July, leaving in place a 10 per cent tax on most imports from other nations and 30 per cent on most Chinese goods. But Trump held out the possibility of reviving certain levies.

The White House has been in negotiations with numerous countries over trade issues, but progress has been unsteady. Finance leaders from the Group of Seven industrialised democracies tried to downplay disputes over the tariffs earlier in the week at a forum in the Canadian Rocky Mountains.

"All the optimism over trade deals wiped out in minutes – seconds, even," wrote Fawad Razaqzada, market analyst at City Index and FOREX.com, in a note on Friday.