Germany’s DAX index dropped sharply on Monday after the U.S. announced sweeping tariffs on European goods. The index fell by almost 10% at the opening bell, later recovering around 3%. Despite the slight rebound, the DAX is still down nearly 20% over the past week. This downturn has erased all gains made since autumn 2024. Investors are growing worried about the broader impact on Europe’s largest economy, with fears of a recession on the rise.
DAX Volatility Follows Tariff Announcement
The U.S. administration introduced a 20% tariff on European imports last week. President Donald Trump stated the move was meant to protect American industries. However, the decision has triggered strong reactions from both European governments and financial markets.
German stocks suffered the most, with key industrial and export-heavy firms leading the losses. This comes as Europe remains heavily dependent on exports, especially to the United States.
Market analysts said the sell-off reflects both panic and uncertainty. “Investors don’t like surprises, and this one hit hard,” said Frankfurt-based economist Lukas Voss.
EU Officials Call for Calm, Urge Dialogue
On Monday, EU trade ministers gathered in Luxembourg to form a unified response. European Commission President Ursula von der Leyen stressed that the bloc is willing to engage in talks. “We remain open to a fair and balanced deal,” she said. “But we will not hesitate to defend European industries and jobs.”
Germany’s Chancellor Olaf Scholz has been active behind the scenes. He is in daily contact with EU leaders and business representatives. Government spokesperson Steffen Hebestreit said Berlin is not seeking a trade fight but is ready to act if needed. “We must protect our economy from harm,” he noted.
Deutsche Bank: Effects Still Unclear
Deutsche Bank released a market note describing the current situation as “serious but evolving.” The note stated: “The immediate damage is visible, but the full impact is still unfolding. Much depends on whether the U.S. escalates or backs down.”
The bank also pointed out that markets may now begin to stabilize. “We could be moving past the peak of uncertainty. From here, investors will likely adjust to known risks rather than fear new surprises,” the report added.
Global Stocks Slide as Tariffs Loom
The new U.S. tariffs are scheduled to take effect this Wednesday. They target a wide range of European products, from machinery to automobiles. Experts warn that the move may disrupt one of the world’s most valuable trade relationships.
Markets in Asia and Europe have seen significant losses since Trump’s announcement on April 2. Global portfolios have lost trillions in value. Major investment banks, including JPMorgan Chase, have revised their global forecasts. They now warn of a rising risk of global recession.
Germany’s recent economic growth—driven by infrastructure and defense investments—has not been enough to ease fears. The tariff shock is already affecting confidence among German exporters.
What Happens Next?
Analysts say much depends on the next steps taken by the U.S. and the EU. If both sides enter meaningful talks, markets could recover. But if the conflict grows, the economic damage could spread beyond trade.
The European Central Bank has not yet reacted, but pressure is building for a response. Some experts are calling for temporary support measures to protect small businesses and exporters.
Germany’s financial markets are facing their toughest test in months. As the DAX drops and global uncertainty rises, all eyes are on Washington and Brussels. Will diplomacy win out, or are deeper economic shocks ahead?