LONDON, April 3 — European shares slumped to a two-month low today after a fresh round of aggressive US tariffs, with bank stocks bearing the brunt of fears that the escalating trade war would slam the brakes on economic growth.

The pan-European STOXX 600 has sunk 1.5 per cent by 0753 GMT. The rout was led by a 1.8 per cent slide in equities in Germany, whose biggest trading partner last year was the US, according to the statistics office.

Wall Street futures EScv1 tumbled 3.1 per cent as investors shed riskier assets in favour of safe-haven bonds and gold.

US President Donald Trump’s move to slap a 10 per cent tariff on most US imports effectively raised the rate of levies on the European Union to 20 per cent and on China to 54 per cent, with both trading partners vowing countermeasures.

Concerns about the impending tariffs’ impact on economic growth had already knocked the benchmark STOXX 600 about 5 per cent lower from its early March record high and overshadowed optimism over Germany’s historic stimulus boost.

Now that they have been announced, the tariffs have "tilted the mood towards recession expectations, which was not necessarily the case prior to that,” said Emmanuel Makonga, European Equity Strategy at Barclays Investment Bank.

"It opens the probability for (the European Central Bank) to cut interest rates even faster in order to provide a little bit of boost with regard to sentiment.”

Eurozone banks, sensitive to the economic outlook, retreated 3.5 per cent as traders ramped up bets of ECB rate cuts despite the trade war threatening to stoke inflation.

The bank-heavy indexes in Italy and Spain fell 1.6 per cent and 1.1 per cent, respectively.

Among stocks, sporting goods makers Adidas and Puma tumbled 10.3 per cent and 9.1 per cent respectively as their key sourcing markets were hit with steep levies.

Among luxury goods firms, Cartier owner Richemont, jewellery maker Pandora and LVMH fell between 2 per cent and 5 per cent, hurt by tariffs on EU and Switzerland.

Although US goods exporters are only 12 per cent of total STOXX 600 revenue, the second-order impact from weaker GDP growth could mean a slight drop in EU earnings growth this year, Barclays strategists said in a note.

A gauge of eurozone stock market volatility spiked 1.5 points to 22.8, while only defensive sectors such as utilities, food and beverages, real estate and telecom eked out gains.

Among other movers, a report said Volkswagen would introduce an "import fee” on vehicles affected by the 25 per cent tariffs imposed by Trump. Its shares fell 0.6 per cent. — Reuters