Trump Tariff U-Turn Lifts Euro, Markets Remain Wary

European markets rebounded Monday after U.S. President Donald Trump delayed a planned 50% tariff hike on European Union imports. The announcement followed a call with European Commission President Ursula von der Leyen, who said on social media the conversation had been “good.” The euro rose to its highest level against the U.S. dollar since April 30.

Friday’s market tumble came after Trump abruptly revived tariff threats, citing stalled trade talks. His reversal over the weekend helped stabilize sentiment but did little to ease investor concerns about the volatility of U.S. trade policy. Trump had previously set a July 9 deadline for resolving EU-U.S. trade negotiations, but repeated backtracking has heightened market anxiety.

Joachim Nagel, head of Germany’s Bundesbank and ECB policymaker, warned recently that Trump’s earlier tariff moves had pushed markets toward the brink. Despite hopes of discipline, the latest developments signal continued unpredictability.

European investors are responding with portfolio shifts. Morningstar data shows European equity ETFs attracted €34 billion through May 16—quadruple the €8.2 billion that flowed into U.S. equity funds. This marks a reversal from 2024 trends, where U.S. funds had dominated inflows by more than 8-to-1 in Europe.

Monday’s market activity is expected to remain subdued due to public holidays in the U.S. and the U.K. Key economic data this week includes the Fed’s April Personal Consumption Expenditures (PCE) index, due May 30, which could offer insight into tariff-driven inflation trends. Meanwhile, inflation data from France and Germany are expected Tuesday and Friday, respectively.

Markets remain on edge as Trump’s erratic trade decisions continue to influence global investment behavior and currency moves.