Trump's tariffs are keeping the markets on edge.

The tensions arising from customs tariffs in the global economy show no signs of abating. Since taking office, U.S. President Donald Trump has maintained an aggressive stance with his customs tariff policy, claiming it would reduce the U.S. trade deficit and even eliminate the need to collect income tax from taxpayers. However, these ambitious yet populist statements have not been well received, particularly by stakeholders in the global economy; rather, they have created selling pressure on the markets, triggering an uncertain environment.

The European Union did not take long to respond to Trump’s announcement that he would raise the customs duties on steel imports from 25% to 50% on Friday, June 4. The EU criticized Trump's decision to double the customs duties on steel imports, stating that the decision "undermines efforts to reach a solution through negotiations in the ongoing trade war."

A spokesperson for the EU speaking to NBC News stated, "We deeply regret the announcement that the U.S. has raised its tariffs on steel imports from 25% to 50%. This decision adds more uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic." He added that the EU is ready to take countermeasures in response to the recent increase in U.S. tariffs.

European automotive stocks are declining

European stocks responded to this development with a wave of selling. The Stoxx 600 index recorded a decline of 0.18%, while France's CAC 40 fell by 0.43% and Germany's DAX index decreased by 0.22%. Automotive sector stocks traded in Europe lost 1.4% in value due to concerns that Trump would impose stricter tariffs on the sector.

On the other hand, investors will also follow the developments in the trade negotiations between the US and China, which intensified last week. National Economic Council Director Kevin Hassett indicated last Sunday that Trump and Chinese President Xi Jinping may meet within this week. Indeed, speaking to the cameras last Friday, Trump stated that China had "completely violated" the trade agreement it reached with America.

"Customs duties are harming the US economy"

Moreover, there are those who think that the tension created by trade wars harms the US economy more. Athanasios Vamvakidis, Bank of America's vice president of global currency strategy, said in a market note to clients last Friday that "tariffs are more detrimental to the U.S. economy because it trades more than other countries." The report acknowledged growth-supporting developments, such as the recent resilience of the U.S. economy and President Donald Trump's abandonment of tax cuts and excessive fiscal spending cuts, but said it was "dominated by negativity."

"Political uncertainty continues in many areas. Companies may suspend hiring and investment plans until the situation becomes clearer," stated the Bank of America report, which continued: "In most scenarios, we see that customs duties will be much higher than the starting point and that current levels are the minimum."

Stock markets started the new week with a decline

The pessimistic picture in the markets due to tariffs has naturally spread to the US stock markets. The Dow Jones opened the new week with a decrease of 0.17 percent, the S&P 500 by 0.36 percent and the Nasdaq index by 0.27 percent.

Just like the stock markets, the crypto market is also being tested by the rising tension caused by the trade wars. Bitcoin, the world's largest cryptocurrency by market capitalization (BTC) has put the brakes on an uptrend that has been going on since May 7. BTC, which has lost 5 percent in the last week, was trading at $104,000 at the time of writing.

This article does not contain investment advice or recommendations. Every investment and trading activity carries risks, and readers should conduct their own research when making decisions.