European stock markets fell nearly 1% on Friday, with the pan-European STOXX 600 index falling by 0.9%, driven by investor caution ahead of a key July 9 U.S. trade policy deadline. Regional indexes also declined, Germany’s DAX and France’s CAC 40 lost 0.9% and 1.2% respectively, while Spain’s IBEX dropped 1.7% and the UK’s FTSE 100 slipped 0.4%.

The drop came as markets reacted to statements from U.S. President Donald Trump, who confirmed the U.S. will begin notifying countries about the new tariff rates they will face on exports to America. With the current 90-day pause on higher U.S. tariffs ending next week, there’s growing uncertainty, particularly for the European Union, which is still negotiating a trade deal with the U.S.

Analysts warn that if high tariffs, such as 25% on autos and 50% on steel and aluminum, remain in place, it could significantly hurt key EU industries. As a result, investors are adopting a “wait-and-see” approach, leading to broad market declines.

Adding to global trade tensions, China announced that it will impose tariffs of up to 34.9% on EU brandy imports, primarily affecting French cognac, starting July 5. This move further dampened sentiment in European markets.

Sector-wise, banks, mining stocks, and retailers were the top losers, each down by around 1.4%. Company-specific moves included ABB’s 15-year contract with Royal Caribbean, which failed to lift its shares (down 1.5%), and Sweden’s Loomis, which fell 3.8%. Conversely, German defence contractor Rheinmetall gained 1.7% after Deutsche Bank raised its price target.

Additionally, softer-than-expected retail data in Italy showed consumer demand may be weakening, with retail sales falling 0.4% in May. Meanwhile, expectations for a U.S. Federal Reserve interest rate cut have now shifted to September, adding further uncertainty to global markets.