MILAN: European shares fell to new two-week lows on Friday after Donald Trump said the United States would impose tariffs on imported steel and aluminium, prompting worries about a global trade war.
Such concerns sparked a broad sell-off in Europe, weighing particularly on the export-oriented German DAX index, which fell 1.8 percent to a six-month low, while the broader pan-European STOXX 600 benchmark was down 1.2 percent.
Trump said duties of 25 percent on steel and 10 percent on aluminium would be formally announced next week, sparking concerns of retaliatory moves from major trade partners such as China, Europe and neighbouring Canada.
"Markets are spooked more by the aggressiveness of the message and by its potential of sparking an extended trade war rather than just by the scope of the measures' economic impact," said JCI Capital fund manager Alessandro Balsotti, noting how steel and aluminium account for just 2 percent of US imports.
All sectors were trading in negative territory, with autos leading the drop, weighed down by a 6 percent slump in Italian-American car maker Fiat Chrysler on concerns that the US tariff move could increase its raw material costs. Elsewhere, Germany's Volkswagen and Daimler and BMW and France's Peugeot fell more than 2 percent.
Steel and aluminium stocks were also generally lower, with ArcelorMittal, Salzgitter and Norsk Hydro all down more than 2 percent.
Steel pipes maker Tenaris, which has production and marketing facilities in the United States, also fell 1.4 percent, giving up earlier gains. A trader said although the tariffs could lead to higher selling prices for Tenaris, the benefit could be offset by a rise in raw material costs.
Trump officially has until April 11 announce his final decision and an analyst at Jefferies said they expected the final policy to be more nuanced due to a mounting pushback from domestic steel consumers and foreign steel suppliers.
They said it still remained unclear which countries and products would be targeted by the measures.
Precious metal miners outperformed as investors sought refuge in safe-haven assets such as gold following Trump's announcement. Randgold, Centamin and Polymetal all rose more than 1.3 percent.
Swedish radiation therapy equipment maker Elekta, up 8 percent, led gainers on the STOXX after it reported above-forecast earnings, while IMI dropped 8.5 percent as its trading update disappointed.
The STOXX was set to end the week down more than 2 percent, ahead of events this Sunday in Italy and Germany that could spark fresh jitters over the political future of Europe, as Brexit talks with the UK continue.
Italy hold a general election, and Germany's SPD party will announce the result of a member's poll on a deal to renew a "grand coalition" government with Angela Merkel's conservatives following an inconclusive election last year.
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