The trade war between US-China is likely to weaken growth in Europe as companies that do business with these regions feel the pinch of the increase in tariffs.
The Chinese Finance Ministry has announced it will raise tariffs on $60bn US goods, after the US said it would increase duties to 25% on on $200 billion Chinese imports. There will be more than 2,500 US products that will face tariffs as high as 25% from the Chinese measures.
European markets took a hit on Monday, with the CAC closing down 1.22%, the DAX fell 1.55% while the FTSE 100 ended down 0.55%. The Europe Stoxx 600 lost over 1%
Chris Beauchamp, market analyst at IG Index said: "The European markets started their day with small gains, but have now been hurt after China announces tariff hikes. EU companies also do business with Asia and US and this is likely to have a knock on effect from the tariff wars.
"It is likely to mean lower growth in Europe in due course. It could mean tariffs against the EU could also be imposed by the US in the long run, with automobiles, drinks and the electronic sector hit."
The car industry is especially exposed to any changes in trade arrangements as its supply chain is one of the most globalised in the world.
Also on the list of US products that will be impacted is food goods like meat, vegetables, fruit juices, tea and coffee as well as alcoholic drinks. Electronic goods are also included such as televisions and cameras.
European companies doing business with these areas are likely to feel the pinch from higher prices, which could be passed on to consumers.