Trump's threat of a 30% tariff on EU goods from 1 August puts Europe’s bullish growth narrative at risk. With investors heavily positioned in eurozone assets, Goldman warns of a 1.2% GDP hit, raising fears of a sharp reversal if tensions escalate.

The European Union has warned that its trade with the United States could be effectively wiped out if Washington makes good on its threat to slap a 30% tariff on goods imported from the bloc.

The bloc’s trade commissioner says the two sides were close to a deal before the president last week threatened to impose a 30 percent levy.