European stock markets closed lower on Tuesday, sharply extending losses as trade tensions between the U.S. and Canada escalated.
After a negative start to the week for global equities as U.S. growth fears weighed, the pan-European Stoxx 600 ended Tuesday down by another 1.7%.
Milan-listed shares of Jeep and Dodge owner Stellantis fell 5%, with the Stoxx Autos index down 2.13%, after U.S. President Donald Trump threatened to hike tariffs on cars coming into the U.S. from Canada. Stellantis has several production facilities in Canada.
Stellantis and other automakers which sell to the U.S. and have major production operations in the countries targeted by tariffs, including Volkswagen, are currently benefiting from a temporary tariff reprieve if their goods comply with the United States-Mexico-Canada Agreement (USMCA.)
However, writing on social media, Trump said Tuesday that "if other egregious, long time Tariffs are not likewise dropped by Canada, I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada. Those cars can easily be made in the USA!"
U.S. stocks were also lower during early deals after Trump also said he would raise tariffs on Canadian steel and aluminum imports by an additional 25%, bringing the total duties to 50%. The new measures come into effect from Wednesday. It comes after Ontario's government issued a 25% tax on electricity exports to the U.S.
Elsewhere in European markets, the Stoxx Europe 600 Travel & Leisure index dropped 3%, with shares of British Airways owner International Airlines Group down by 6.1%. The company on Monday announced the launch of a corporate investment arm that will funnel up to 200 million euros ($218 million) into "high-potential companies shaping the future of aviation."
Healthcare stocks were also in negative territory, after Danish pharmaceutical giant Novo Nordisk's latest weight loss drug trial results. The pharma giant closed 3.8% lower.
Volkswagen meanwhile reported a 15% year-on-year drop in annual operating profit on Tuesday, citing an increase in costs and "extraordinary expenses" in regards to its restructuring plans.
Regional markets kicked off the new trading week in lower territory on Monday, continuing the volatility seen in worldwide markets last week in the face of uncertainty over the global trade and tariffs outlook.
When asked about the possibility of a recession, Trump said during a Fox News interview that aired on Sunday that the economy was going through "a period of transition." Economists argue that Trump is proving to be something of an "agent of chaos" with his unpredictable trade tariff policies but assess that a downturn isn't in the cards just yet.
