Abdelrahman
Trump’s Presidential Memo on Reciprocal Tariffs Sparks Global Market Optimism
Recently, US President Donald Trump issued a Presidential memorandum instructing his administration to explore the implementation of reciprocal tariffs. This directive aims to provide a period for negotiations, resulting in a shift toward a more favorable outlook in global markets.
On Thursday, Trump tasked the US Trade Representative and the Secretary of Commerce with launching an investigation into the proposed tariffs. This inquiry will review not only the tariffs imposed by other countries on US products but also non-tariff barriers like unfair subsidies, value-added taxes (VAT), and currency exchange rates. Commerce Secretary Howard Lutnick indicated that the findings should be ready by April 1, allowing the administration to take prompt action thereafter. If enacted, these tariffs would represent one of the most significant measures taken by Trump’s administration following the implementation of a 25% tariff on steel and aluminum, along with an additional 10% tariff on imports from China.
During a press briefing in the Oval Office, Trump noted, “They charge us a tax or tariff, and we charge them the exact same,” emphasizing that exact figures can vary by country. He also pointed out that tariffs on automobiles, semiconductor chips, and pharmaceuticals would likely incur elevated rates, in addition to these reciprocal tariffs.
Implications for the European Union
The investigation is expected to focus on the European Union’s VAT, which Trump has criticized as a significant element of the inequitable trading dynamics between the EU and the US. Data from the US Census Bureau reveals that in 2024, the trade volume between the EU and the US reached approximately $1.3 trillion (€1.24 trillion), with the US facing a deficit of $267 billion (€255 billion). Nevertheless, the EU has previously highlighted that it imports a greater volume of services from the US.
Once these tariffs are imposed, the European pharmaceutical industry may face severe repercussions. According to US Trade Census data, the US imported around $127 billion (€121.4 billion) in pharmaceutical products from Europe in 2024. A significant portion of this came from GLP-1 weight-loss medications, notably Novo Nordisk’s Wegovy, which commands a considerable market share in the US.
Additionally, European automotive manufacturers will likely feel the impact as the Trump administration cites unfair trade practices and taxation issues between the two economies. Trump has also urged the EU to procure American ammunition to bolster the NATO alliance.
European Stock Markets Rally
Trump’s decision to postpone the imposition of reciprocal tariffs, coupled with proposed discussions between Trump and Putin aimed at resolving the Ukraine conflict, has led to a surge in European stock markets, marking them as the top gainers among major global exchanges. On Thursday, the Euro Stoxx 600 index rose by 1.1%, while Germany’s DAX climbed over 2% to reach record high levels. The euro and British pound also strengthened against the dollar amid hopes for a resolution to the ongoing military tensions between Russia and Ukraine. European leaders from Britain, France, and Germany, however, insist they must have a role in any upcoming negotiations.
Commenting on the situation, Kyle Rodd, a senior market analyst at Compital.com, noted in an email, “While the markets are treading carefully with these issues, the Trump administration’s actions thus far appear relatively calculated and allow for negotiations, reducing the likelihood of a retaliatory spiral.”
On Wall Street, all three major indices—the Dow Jones Industrial Average, S&P 500, and Nasdaq—closed in positive territory. A drop in US government bond yields contributed to a weaker US dollar, leading to rising metal prices. Following a brief pause, gold prices continued their ascent, approaching previous all-time highs achieved two days earlier.
