European stock markets fell sharply as trade tensions between the EU and the US escalated. Investors are worried about new tariffs that could be imposed by the administration of US President Donald Trump. According to Bloomberg, the negative sentiment intensified after the US imposed a 25% tariff on imports from Mexico and Canada, as well as a 10% tariff on imports from China.

The Stoxx Europe 600 index fell 1.4%, its biggest daily drop since December 20. The worst-hit were car companies, especially those that export heavily to the US and have significant production facilities in Mexico. Other sectors dependent on the Mexican and Chinese markets also suffered, including Spanish banks BBVA SA and Banco Santander SA.

Analysts warn that the introduction of new tariffs could lead to a significant deterioration in the financial performance of European companies. According to JPMorgan Asset Management strategist Vincent Juvins, such a confrontational approach to trade relations with the EU is forcing investors to turn to less risky assets.

The situation has also prompted European investors to actively hedge risks. They are waiting for an official list of goods and sectors that may be burdened with new tariffs, which adds to the instability in the markets.

In parallel, the European Central Bank is considering the possibility of further interest rate cuts to support the economy in the face of threatening trade conditions. However, ECB Governing Council member Peter Casimir warned against premature optimism about inflation, which showed an unexpected increase in January this year.