DAX Reverse Course After Yesterday’s All-Time High as Trump Tariffs Come into Effect
Trump tariffs on Mexico and Canada become effective and the US president adds another 10% of tariffs to China.
- Global Markets rattled
- DAX feels risk of tariffs on EU
- Defense sector continues to outperform
The DAX turned south today, dropping 1.5% on the day after yesterday’s all-time high. Hopes for a new government and ECB policy the main driving factors of the rally.
These factors have outweighed a decline in exports to China, which used to be the Germany’s largest trading partner. And even the state of the German economy, which has been contracting for 2 years.
Reality Check on Trump Policy
Global markets are coming to the realization that Trump is not always playing poker. Today the well vented tariffs of 25% on Canada and Mexico become effective.
Investor sentiment has begun to assess the risk economic contraction that may arise from a trade war.
While the NAS100 and the DOW have been in retreat for weeks, the DAX has continued to rally higher.
Yesterday’s DAX rally to a new ATH was mainly fueled by the comments at EU leaders’ meeting over the weekend. The politicians pledged greater spending in defense, which sparked a rally in sector stocks.
DAX Live Chart
Defense Stocks Higher but DAX Falters
Defense sector stocks continues to rally as EU Commissioner Von der Leyen gives a speech on the commitment of the EU to strengthen the military.
Rheinmetall is up 3.01% and MTU Aero is 1.36% on the day. Of the 40 stocks in the index, only 6 are printing gains.
The DAX has had an outperformance to its global peers since the start of 2025. With expectations on ECB policy heavily acting as the driver for higher valuations.
However, the global impact of Trump’s policies and the fact that these same are likely to be inflicted on the EU are taking their toll on German stock investors.
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