European Companies Face Growing Uncertainty Amid Trump’s Tariff Threats

Tariff threats from Trump add to concerns about trade war and investment uncertainty for European businesses / AFP

As U.S. President Donald Trump's sweeping tariff attacks become a reality, European Union (EU) companies are increasingly on edge. After facing tariff pressure from Mexico, Canada, and China, the EU is now in Trump’s crosshairs as the next target for potential tariffs. Executives from several European companies have warned that the uncertainty surrounding Trump’s trade policies is already impacting their investment strategies, with many preparing for financial repercussions if the trade war escalates.

The European economy faces significant risks as Trump has threatened tariffs not only on Chinese goods but also on European imports, particularly targeting industries like automotive and energy. These threats are especially concerning for EU businesses operating in the U.S., as they could lead to slowed investments and reduced profits, further exacerbating economic challenges. Several CEOs from prominent European companies have expressed concerns that trade tensions with the U.S. could have detrimental effects on their operations.

Among these, the CEO of Germany’s RWE, Markus Kreber, has raised alarms about the impact of potential tariffs on the company's renewable energy projects in the U.S. The company, one of Europe’s largest electricity producers, depends heavily on imported intermediate goods such as rotor blades and batteries, which are currently in short supply within the U.S. Kreber stated that the uncertainty surrounding the imposition of tariffs on these goods makes it difficult to plan future investments. For businesses in the luxury goods sector, like LVMH, and energy giants like Shell, expansion plans are now under review due to concerns about the ongoing tariff threats. Many executives argue that resolving the policy uncertainty is critical, as the alternative—expanding local production in the U.S.—remains unfeasible for most companies.

Goldman Sachs, the American investment bank, also expressed concern over the broader economic implications of Trump’s trade policies. The bank has forecasted that European companies’ earnings per share (EPS) growth will be limited to just 3% in 2025, a significant underperformance compared to market expectations. Goldman Sachs analysts emphasize that the real threat is not the tariffs themselves but the negative impact of trade uncertainty on economic growth and corporate investment.

The automotive industry, in particular, is bracing for a potential escalation of the tariff dispute. Trump has hinted at implementing reciprocal tariffs on European products in retaliation for what he perceives as unfair trade practices, citing the 10% tariff on U.S. cars imposed by the EU compared to the U.S.’s 2.5% tariff on European cars. If the U.S. imposes higher tariffs on European imports, the impact on businesses could be severe, particularly in the automotive sector. Volvo CEO Jim Rowan pointed out that the situation could worsen if the U.S. increases its tariff on EU cars beyond 10%, forcing companies like Volvo to consider increasing production in U.S. factories to offset the rising costs.

Other industries, such as the spirits sector, are also at risk. Diageo, a major British alcohol producer, has warned that a 25% tariff on goods from Mexico and Canada could lead to a $200 million reduction in profits by June. Similarly, French spirits company Pernod Ricard has expressed concerns over the potential damage to its financial results due to tariffs.

In the maritime shipping industry, companies like Denmark’s Norden have warned that retaliatory tariffs between the U.S. and EU could result in a "double blow" to businesses. While a shift in supply chains might lead some EU companies to source goods from other regions like South America, the overall impact would likely weaken both the U.S. and EU economies.

As the trade war between the U.S. and EU looms, the uncertainty surrounding tariffs continues to grow, putting European companies at significant risk. The ongoing trade dispute underlines the growing volatility in global markets, leaving companies struggling to navigate the unpredictable policy environment.