US President Donald Trump, shown here with European Commission President Jean-Claude Juncker in July, threatened new tariffs on European imports on Tuesday (SAUL LOEB)

New York (AFP) – European and US stocks fell Tuesday amid a flare-up in trade tensions between Washington and Brussels, while the pound fluctuated ahead of a key Brexit summit.

US President Donald Trump threatened to impose tariffs on billions in European imports in retaliation over subsidies to aviation giant Airbus, reviving a contentious trade matter that had been put on the backburner for months.

The statement signaled the White House could pivot to a tough negotiation with Europe once it resolves a months-long trade dispute with China.

Trump’s remarks were likely to raise the temperature for US and EU negotiators, who have been meeting since last year in preparation for proposed trade talks after a cease fire was called last summer.

“Most people were happy we were likely close to a resolution to the trade dispute with China,” said CFRA Research Chief Investment Strategist Sam Stovall. “We now have to endure a trade dispute with Europe.”

The trade threat came as the International Monetary Fund trimmed its 2019 global growth forecast to 3.3 percent from 3.5 percent, citing downside risks associated with Brexit, trade uncertainty and other factors.

Wall Street finished firmly lower as the S&P 500’s eight-day winning streak ending with a 0.6 percent drop to 2,878.20.

Earlier, bourses in Frankfurt, Paris and London also finished solidly lower.

– Brexit extension? –

The pound fluctuated and was modestly lower against the euro and the dollar near 2040 GMT as Prime Minister Theresa May made last-ditch visits to Paris and Berlin to press for more time to win support for her Brexit plan.

May asked to be given until June 30 to arrange Britain’s orderly departure, but EU leaders fear that won’t be long enough and are now expected to offer her up to a year.

Another extension would remove the possibility of Britain crashing out of the EU on Friday with no agreement to govern economic ties with the bloc afterwards.

US Treasury Secretary Steven Mnuchin said such a “hard Brexit” remained possible.

“I think at this point we need to be prepared for a hard Brexit as a very realistic outcome,” Mnuchin said during testimony to the House Committee on Financial Services.

He added that the US Treasury had coordinated with the Federal Reserve and other banking regulators to be ready for such a scenario, as London and Brussels scramble to avoid a potentially chaotic “no deal.”

– Downbeat ECB –

Besides the Brexit summit, markets also are looking ahead to Wednesday’s meeting of the European Central Bank and the release of minutes from the last Federal Reserve meeting.

Analysts expect the ECB to hint at moves to support the eurozone economy but stop short of new action.

ECB President Mario Draghi “will have no choice but to give a downbeat assessment” at his news conference Wednesday, analyst Jack Allen of Capital Economics predicted.

Draghi looks set to repeat his long-standing formulation that “an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation” to the bank’s target of just below two percent.

– Key figures around 2045 GMT –

New York – Dow: DOWN 0.7 percent at 26,150.58 (close)

New York – S&P 500: DOWN 0.6 percent at 2,878.20 (close)

New York – Nasdaq: DOWN 0.6 percent at 7,909.28 (close)

London – FTSE 100: DOWN 0.4 percent at 7,425.57 (close)

Frankfurt – DAX 30: DOWN 0.9 percent at 11,850.57 (close)

Paris – CAC 40: DOWN 0.7 percent at 5,436.42 (close)

EURO STOXX 50: DOWN 0.6 percent at 3,417.22 (close)

Tokyo – Nikkei 225: UP 0.2 percent at 21,802.59 (close)

Hong Kong – Hang Seng: UP 0.3 percent at 30,157.49 (close)

Shanghai – Composite: DOWN 0.2 percent at 3,239.66 (close)

Oil – Brent Crude: DOWN 49 cents at $70.61 per barrel

Oil – West Texas Intermediate: DOWN 42 cents at $63.98 per barrel

Pound/dollar: DOWN at $1.3056 from $1.3061 at 2100 GMT on Monday

Euro/pound: UP at 86.26 pence from 86.23 pence

Euro/dollar: UP at $1.1264 from $1.1263

Dollar/yen: DOWN at 111.15 yen from 111.48 yen

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.