European stocks closed lower on Wednesday after U.S. President Donald Trump threatened to hike tariffs on Chinese goods if Beijing does not agree to a trade deal.
The pan-European Stoxx 600 was 0.3% lower at the closing bell. Travel and leisure stocks led losses, ending the session more than 1% lower, while the China-exposed basic resources sector was 0.4% lower.
During a meeting with his cabinet on Tuesday, the president said that if China did not make a deal, he would "just raise tariffs even higher."
The comments came after reports that Beijing is pessimistic about the prospect of an imminent "phase one" trade deal due to Trump's refusal to roll back existing tariffs.
China's foreign ministry on Wednesday also lashed out at the U.S. after the Senate unanimously passed a bill supporting Hong Kong protesters.
Stateside, traders are also monitoring impeachment proceedings against the president. Gordon Sondland, U.S. ambassador to the European Union, gave a testimony on Wednesday, in which he claimed that Trump directed his personal lawyer Rudy Giuliani to pursue a "quid pro quo" with Ukraine.
Stocks on Wall Street traded in negative territory Wednesday amid the fresh political uncertainty.
In corporate news, Swiss stock exchange operator SIX has said its offer for Spanish bourse operator BME is "financially attractive" to BME shareholders amid an ongoing bidding war with pan-European operator Euronext.
The European Central Bank (ECB) warned in its Financial Stability Review on Wednesday that excessive financial risk-taking and a slowdown in bank profitability posed substantial challenges to the euro area economy.
Shares of Britain's Micro Focus jumped 4.8% after the software company said it expects its full-year revenue and profit to be in line with existing guidance.
Italy's Nexi climbed 5% after Italian media reported that Intesa Sanapaolo is in talks over a strategic partnership with the bank.
British home improvement retailer Kingfisher dropped 6% after reporting a fall in third-quarter like-for-like sales, while Rheinmetall shares fell 7% after the German defense contractor trimmed its full-year sales outlook.
Elsewhere, Continental's shares were down 1.5% after the auto supplier said it would cut 5,040 jobs, while shares of German automaker BMW shed 0.3% after its CFO told analysts the company was in talks with workers about cost-cutting measures, Reuters reported.