European shares fell on Wednesday as steep U.S. reciprocal tariffs kicked in, exacerbating fears over the economic damage caused by the trade war that even spread to the bond market.

The pan-European STOXX 600 slumped 2.5% at 0711 GMT, as previous session’s rally fizzled out. The trade-sensitive Germany’s benchmark index dove 2.1%.

Trump’s reciprocal tariffs, including 20% reciprocal tariff on some European Union products took effect from Wednesday.

German finance minister Joerg Kukies said Europe’s largest economy is at risk of another recession as a result of trade tensions. The euro zone is already struggling with recent tariff hikes on autos and metals.

Energy stocks slumped 3.8% as oil prices tumbled to their lowest in four years, while miners tanked 4% as the world’s top metals exporter China was hit with a massive 104% levy. [O/R]

Rate-sensitive banks slumped 2.8% as traders fully priced in an interest rate cut from the European Central Bank next week to shore up deteriorating economy.

Investors also dumped U.S. government bonds, often considered safe-haven assets, as they fled to the safety of cash.

Germany’s Redcare Pharmacy slumped 15.6% after launching a convertible bonds offering.

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