Trump's Tariff Threats Spark Market Rollercoaster: Investors Brace for Uncertainty

The unpredictability of U.S. President Donald Trump’s trade policies continues to generate uncertainty among investors and managers, who face challenges in planning within a constantly shifting environment.

Following a recent dialogue with European Commission President Ursula von der Leyen, Trump has postponed his threat to impose 45% tariffs on European Union imports until July 9. This decision coincides with the end of a 90-day trade truce granted by Washington to several countries, while the deadline for China extends to August 20.

The trading session, marked by the closure of London and New York markets due to a holiday, reflected cautious optimism. European stock exchanges recorded gains exceeding 1.2%, driven by hopes that trade negotiations might prevent an escalation of tensions. The euro, meanwhile, climbed to $1.15, a level not seen since early April, though volatility remains a constant.

Since Trump announced his intent to restructure global trade on March 10, markets have been at the mercy of his statements. Deutsche Bank analysts note that tariff threats are often a negotiating tactic, leading to significant swings in stock indices.

The Ibex 35, which lost 1.3% on Friday, recovered 1.1% on Monday, while the French Cac 40 advanced 1.7%. Technology and automotive sectors led the gains, though stocks like Telefónica (-0.3%) and Repsol (-0.2%) closed in the red.

Given the lack of clarity, experts recommend caution. “Markets are trapped in a cycle of euphoria and panic, driven by unpredictable headlines,” warns Laura Sánchez, a BBVA analyst, as reported by Cinco Días. “It’s crucial not to be swayed by emotions and to maintain diversified portfolios,” she added.

Santander notes that recent stock market gains do not reflect underlying risks, especially after the optimistic valuations that have dominated recent months.

The temporary relief following trade negotiations has allowed a significant recovery in risk assets. Germany’s Dax has risen 22% in 2025, while the S&P 500 on Wall Street has managed to stay in positive territory since last week. However, analysts warn that stability is fragile.

“Tariff uncertainty could strike again at any moment. We saw it with sanctions on Chinese tech firms and now with the EU,” states a Goldman Sachs report.

Deutsche Bank experts estimate that 45% tariffs on European products could reduce the Eurozone’s GDP by 0.5%, an impact that, combined with the global slowdown, could push the region toward recession. “In this environment, betting on the outcome of trade negotiations is risky. History suggests that high tariffs are not sustainable long-term due to their economic cost,” they emphasize.

Post from von der Leyen's X account. Source: X.

A weakened dollar

Adding to trade tensions are other pressures, such as Fitch’s recent downgrade of the U.S. credit rating and the approval of an ambitious fiscal plan in the U.S. Congress. These events have weakened the dollar, which has lost 9% against the euro this year, moving from $1.05 to $1.15.

UBS analysts predict this trend could intensify, projecting an exchange rate of $1.22 per euro by the end of 2025. “The combination of erratic policies, a growing fiscal deficit, and high external debt is eroding confidence in the dollar,” explains Clara Méndez, an economist at UBS.

With trade negotiations on the horizon and key monetary policy decisions approaching, the coming months promise to keep markets volatile. Investors, meanwhile, face the challenge of navigating a landscape where uncertainty is the only certainty.

“Diversification and prudence are the best tools in this context,” concludes Sánchez, summarizing the sentiment of a market cautiously awaiting Trump’s next move.