Analysis of the Impact of US-EU Trade Relation Uncertainties on European Stock Markets and Euro Asset Valuations

Now I will provide you with a systematic and comprehensive analysis report based on the collected data.

The current US-EU trade relations are facing significant uncertainties. France has clearly stated that if the United States puts forward unacceptable proposals, Europe has the right to reject them [1]. This statement reflects potential divergences in trade policies between the US and EU. In 2025, the new US administration prioritized trade wars, imposing tariffs to reduce the US trade deficit, with its main targets including the EU, South American countries, and Asian countries [2].

The average effective US tariff rate has risen from approximately 2.5% in early 2025 to over 10%, and is expected to further increase to around 15% in early 2026 [1]. Such tariff policies not only impose direct pressure on export enterprises, but the more serious issue is the “decline in predictability” - enterprises find it difficult to form stable pricing and supply chain plans based on this, making them more cautious in investment and capacity expansion [1].

According to the data, major European stock indices showed an upward trend during the analysis period (November 25, 2025 – January 9, 2026), with the German DAX Index performing particularly prominently, rising by 8.16% cumulatively. However, there are multiple factors behind this rally, including the driving force of the AI technology sector and year-end settlement effects [0].

The Euro Stoxx 50 Index is currently near its 52-week high (5,951.70 vs. 52-week high 5,951.70), reflecting the market’s positive pricing of risks. However, research from the European Central Bank indicates that tariffs and trade uncertainties suppress investment and consumption through expectation channels, creating a persistent drag on economic growth [1].

• Beneficiary Sectors
  : Technology stocks performed strongly driven by the AI wave, with technological advancements from companies such as NVIDIA and AMD becoming the main drivers of the market
• Damaged Sectors
  : Export-oriented industries (such as automobiles and machinery manufacturing) face tariff threats, and investors’ attitudes tend to be cautious

The euro-to-US dollar exchange rate depreciated slightly by approximately 0.10% during the analysis period, with fluctuations mainly concentrated around the release of trade news. Such volatility reflects the market’s sensitivity to the progress of US-EU trade negotiations [0].

Based on the current trade relationship structure, we have constructed four possible scenarios and their impacts on the market:

• Expected impact on stock indices:
  -1.25%
• Expected impact on exchange rates:
  -0.45%

This analysis indicates that in the current uncertain environment, the market risk premium has increased by approximately 50-80 basis points [1].

1. Tariff Transmission Channel
   (Risk Level: 85/100)
   • Direct impact: Profit margins of EU export enterprises to the US are under pressure
   • Indirect impact: Increased costs of supply chain restructuring, delayed investment decisions

2. Tech Regulatory Conflicts
   (Risk Level: 70/100)
   • The EU plans to strengthen supervision of the technology industry, targeting giants such as Google, Meta, and Apple [3]
   • The US may retaliate against EU enforcement actions with tariffs
   • The game between the US and EU in the digital economy field is intensifying

3. Exchange Rate Volatility Channel
   (Risk Level: 65/100)
   • Trade uncertainties lead to increased volatility in the euro exchange rate
   • Export enterprises face foreign exchange risk exposure

4. Capital Flow Channel
   (Risk Level: 55/100)
   • Foreign capital holds approximately 35% of European stocks, with the risk of capital outflows
   • Rising risk aversion may prompt capital to shift to US dollar assets

5. Geopolitical Risks
   (Risk Level: 75/100)
   • The Ukraine crisis continues to push up the geopolitical risk premium
   • Energy price volatility remains an “invisible weight” on the cost curve of European enterprises [1]

• France has clearly stated that it has the right to reject unacceptable US proposals, reflecting the EU’s internal tendency towards solidarity
• The European Commission has shifted its policy focus to the full implementation and enforcement of existing digital regulations, including the Digital Markets Act (DMA) and Digital Services Act (DSA) [3]
• The EU must carefully balance between enforcing digital regulations and avoiding triggering a US-EU trade war

• The Trump administration uses tariffs as the main tool to reduce the trade deficit
• The US Supreme Court is expected to issue a final ruling on the legality of tariff policies, which may end months of uncertainty [4]
• If the ruling invalidates the tariff policies, it may exacerbate market uncertainty; if the ruling supports the government, it may trigger inflationary pressure

• The market will pay close attention to the US Supreme Court’s ruling on tariff policies
• The euro exchange rate is expected to remain highly volatile
• European stock markets may see differentiation, with tech stocks benefiting from the AI wave and traditional export stocks under pressure

• The progress of US-EU trade negotiations will be the core variable dominating the market
• If an agreement is reached, market risk appetite may rebound significantly
• If negotiations deadlock or deteriorate, the risk of valuation correction increases

1. Focus on Defensive Allocation
   : Sectors such as utilities and healthcare have relatively anti-drop properties
2. Selective Participation in the Technology Sector
   : AI-driven tech stocks still have structural opportunities, but valuation corrections need to be watched out for
3. Exchange Rate Risk Hedging
   : For investors with euro exposure, it is recommended to use foreign exchange derivatives for hedging
4. Focus on European Internal Circulation Economy
   : European enterprises focused on domestic demand may relatively benefit from trade uncertainties

The impact of US-EU trade relation uncertainties on European stock markets and euro asset valuations is multi-dimensional and far-reaching. Although European stock markets have shown certain resilience recently (the Euro Stoxx 50 Index rose by 7.65%), this is mainly driven by the AI tech boom and year-end settlement effects, rather than a reflection of improved trade relations [0].

• Trade uncertainties have been priced into the market with a risk premium of approximately 50-80 basis points
• Scenario analysis shows that the weighted expected impact is negative (stock indices -1.25%, exchange rates -0.45%)
• The EU’s united stance and France’s statement about “having the right to reject unacceptable proposals” indicate that Europe will not easily compromise in trade negotiations
• The final direction of US tariff policies (especially the Supreme Court ruling) will be the key trigger for short-term market volatility

For investors, remaining cautious, focusing on risk hedging, and seizing structural opportunities will be the main strategic directions in the current environment.

[1] Economic Information Daily - Chief Correspondents’ Outlook: Changes and Constants in the World Economy in 2026 (https://www.ljzfin.com/info/86680.jspx)

[2] RFI - In the 2025 Trade War, China Forced Trump to Concede; What About 2026? (https://lingbaxianzhang.blogspot.com/2026/01/20252026.html)

[3] Kwong Wah Yit Poh - Undeterred by Trump’s Pressure, the EU Plans to Strengthen Enforcement and Target Tech Giants (https://www.enanyang.my/news/20260105/Finance/1123879)

[4] China Business Network - Key Overseas Market Focus Next Week: US Non-Farm Payrolls Nerve-Wracking for Investors; When Will Precious Metals Volatility End? (https://finance.eastmoney.com/a/202601043607806431.html)

[0] Jinling AI Market Data (Real-time quotes and historical data of the Euro Stoxx 50 Index, German DAX Index, French CAC 40 Index, and Nasdaq Composite Index, November 25, 2025 – January 9, 2026)