European stocks plunged, led by the auto sector, as U.S. President Donald Trump said a new round of tariffs on Chinese goods was “ready to go” and that China and the European Union were manipulating their currencies.

The Stoxx Europe 600 extended declines to 0.8 percent, led by cyclical sectors including auto and mining, while the VStoxx jumped. Trump said on Twitter the EU was among those that had been manipulating their currencies, after earlier saying in an interview on CNBC the U.S. is ready to impose levies on all $505 billion of Chinese imports into the U.S.

The president’s remarks indicate his willingness to escalate America’s trade war with China, dashing hopes the two sides would arrive at a compromise before more tariffs were imposed. Meanwhile, German Chancellor Angela Merkel said the EU is ready to retaliate against any U.S. auto tariffs as it prepares to meet with Trump to discuss the possibility of cutting car duties. The comments come just as global markets were starting to enjoy a reprieve from trade headlines, with attention shifting to the earnings season.

French auto parts maker Faurecia led declines in the auto sector, which has been whipsawed lately by Trump’s threats of raising tariffs on European cars. Peugeot SA fell 3.4 percent while Volkswagen AG lost 3.7 percent.

“In such a conflict situation, no one can buy auto stocks, or even hold them,” said Arndt Ellinghorst, an analyst at Evercore ISI. “If you’re an auto exec now, getting customers and orders is the least of your worries. You’re only focused on politicians.”