Relations between China and the US continue to deteriorate as both nations impose new shipping fees, alarming investors. The trade conflict escalates despite President Trump’s social media assurance: “Don’t worry about China, it will all be fine!”
European stock markets opened lower on Tuesday, ignoring Wall Street’s Monday rally after Trump’s optimistic remarks about Beijing. Investor confidence remains fragile as the world’s two largest economies clash over trade.
Both countries began imposing mutual shipping fees on Tuesday after Washington’s probe into China’s growing shipbuilding dominance. The US set a $50 (€43.27) per tonne charge on Chinese ships in American ports, while China imposed 400 yuan (€48.65) per tonne, with plans to raise the fee gradually.
Beijing also sanctioned five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean to reinforce its maritime power.
The status of trade negotiations remains uncertain, though Trump said he may still meet President Xi Jinping later this month during a regional summit.
Over the weekend, Trump threatened China with 100% tariffs before softening his tone online, writing: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The USA wants to help China, not hurt it!!!”
European Markets Slide Amid Political and Economic Strain
European investors remain cautious as France’s new government, led by Sébastien Lecornu, prepares to address parliament at 15:00 CEST. Lecornu aims to stabilize France politically by securing approval for a budget to reduce the country’s deep deficit.
In the UK, unemployment climbed to 4.8% in the three months to August, heightening worries about Britain’s fragile economy.
By midday in Europe, markets showed sharp declines. London’s FTSE 100 fell 0.38% to 9,406.64, Paris’s CAC 40 dropped 0.76% to 7,874.20, and Frankfurt’s DAX sank 0.87% to 24,176.42.
The European benchmark STOXX 600 was down 0.71%, while Madrid’s IBEX 35 slipped 0.2% to 15,511.00.
EasyJet shares rose nearly 5% after rumours of a takeover by shipping giant MSC, despite MSC denying involvement.
“Investors are speculating about potential buyers for EasyJet. That’s why shares remain elevated even after MSC’s denial,” said Dan Coatsworth, head of markets at AJ Bell.
Across the Atlantic, Dow Jones futures dropped 0.8%, S&P 500 futures fell 0.94%, and Nasdaq futures declined 1.23%. Meanwhile, US rare earth companies rallied as trade tensions deepened. Critical Metals surged over 33%, USA Rare Earth gained 9%, and MP Materials rose 6%.
The euro and British pound weakened against the dollar, while the yen strengthened.
Oil prices tumbled, with US crude falling over 2% to $58.25 and Brent dipping below $62. Gold climbed to $4,156.80, up 0.58%, and silver briefly hit a record $52 before retreating to $50.
Cryptocurrencies plunged, with Bitcoin down 3.5% at $111,801 and Ethereum falling 6.4% to $4,006.49 before noon in Europe.
Markets Brace for Earnings Amid AI Bubble Fears
Investors fear a possible AI-driven bubble as tech valuations soar far beyond company profits. Analysts warn that US markets now appear overpriced, fuelling comparisons to the 2000 dot-com collapse.
These concerns heighten anticipation for the upcoming earnings season, which could reveal whether profits justify current valuations.
Major companies including JPMorgan Chase, Johnson & Johnson, and United Airlines will release financial results this week, offering clues about the true strength of corporate America.
