While US stocks prices stay high amid Trump's tariff-trade agenda, European stocks struggle

European stocks are under pressure amid sweeping changes in U.S. tariff policies this year, even as the overall European economy appears to be weathering the storm better than many expected. 

Over the six months since the White House first started applying new tariffs on most goods imported to the U.S., the Stoxx Europe 600 Index of European blue-chip stocks has gained nearly 8%, far smaller than the 24% increase over the same span for the U.S.’s S&P 500. From the start of the year to May, the Stoxx 600 outpaced the S&P 500.

Prices in the European Union in September were 2.6% above their level a year earlier, higher than the target of 2.0% but still better than the 3%rate in the U.S. The European rate dropped to 2.1% in October, but amid the government shutdown there is no comparison figure for the U.S.

Economic growth for the EU was 1.5% in the third quarter of the year, barely half of the equivalent figure for the U.S. And the euro currency has stabilized at around $1.15 per euro after strengthening earlier in the year, a trend that acts as a drag on exports.

“The headline news is that the tariffs have had a measurable impact so far, but not as big as what had been predicted by most economists back in April and May,” Javier Noriega, chief economist with Milan investment bankers Hildebrandt and Ferrar, told Just the News. “We don’t know what will happen over the coming months, but so far I think economies have been surprisingly resilient.”

When the U.S. markets closed Friday, their October numbers included the S&P 500 climbing 2.3%. The Nasdaq having increased 4.7% and the 30-stock Dow advanced 2.5%, according to CNBC. 

The S&P 500 slipped 0.4% and edged a bit further from its all-time high set on Tuesday. The Dow Jones Industrial Average was up 143 points, or 0.3%, as of 1:59 p.m. Eastern time. The Nasdaq composite fell 0.9% from its record set the day before.

But even without deep immediate impacts, Noriega and other analysts said that the change in U.S. tariff policy is likely to have wide-reaching effects over time.

In the short term, European exporters in sectors directly targeted by the new U.S. tariffs — particularly automobiles, agricultural products, and steel — have reported falling margins and growing uncertainty over future orders. German automakers, whose U.S.-bound exports account for nearly one-fifth of the country’s car production, have been among the hardest hit, according to news reports.

Economists say that government spending and stepped up household spending are helping to offset some of the impacts of the tariffs, though most agree it’s not sustainable.

For now, European policymakers remain focused on maintaining stability rather than retaliating with new trade measures. The European Commission’s trade office has urged Washington to “return to constructive dialogue.” Some European trade officials have been urging for trade talks to include discussions of expiry dates for the tariffs going forward.

But at the same time they are pushing for more talks with U.S. trade officials, the Europeans are also exploring ways to deepen trade ties with Latin American and Asian trading partners, especially China.

The European Central Bank (ECB), for its part, faces a delicate balancing act: keeping inflation under control without stifling growth just as borrowing costs begin to bite.

“The ECB has been cautious,” Noriega also said. “If they tighten too fast, they could undo the resilience we’ve seen so far. But if they move too slowly, inflation could reaccelerate, especially if the tariffs lead to a new wave of supply shocks.”