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After U.S. President Donald Trump announced a new tariff policy on April 2, 2025, global markets were plunged into chaos, with Europe feeling the impact significantly. The tariffs have seen the European Union subjected to a 20% import duty, while the U.K. faces a slightly lower tariff of 10% due to its relatively balanced trade relationship with the United States. The unfolding situation has prompted widespread speculation regarding potential responses from policymakers and the extent of escalation in trade tensions.
Economic analysts largely agree that the anticipated slowdown in growth and deterioration of trade relations will yield few beneficiaries among nations and industries affected.
Impact on Luxury Goods
The luxury sector was notably hit, with Europe’s Stoxx Luxury 10 index dropping by 4.8% by mid-afternoon in London. Notable brands such as Burberry saw their shares plummet over 8%, while LVMH fell 4.8% and Kering, the parent company of Gucci, decreased by 5%. These luxury goods, often produced in Europe, are particularly vulnerable to customer tariffs in the U.S.
According to a report from Citi, prominent names in the luxury sector—like German shoemaker Birkenstock, Italian fashion label Brunello Cucinelli, and Danish jeweler Pandora—derive 31% to 47% of their sales from the American market. Businesses like LVMH and Kering also reported that at least 20% of their sales stem from the U.S. market, further emphasizing the stakes involved.
Food and Beverage Sector
The EU regards the U.S. as a “major destination” for various food and beverage products, including wine, chocolate, and spirits. However, the new tariffs have resulted in stocks of food and drink manufacturing companies like AB InBev, Pernod Ricard, and Heineken suffering declines of 0.6%, 2.5%, and 1.3% respectively. Tate & Lyle, which operates one of the largest sugar refineries in the world, saw its shares decrease by 2.6%.
Trade body Spirits Europe highlighted the extensive integration of sectors across the Atlantic, stressing that the trade in spirits supports numerous jobs in both the EU and the U.S. They expressed a desire to return to a trading environment that benefits both sides.
Germany’s Concerns
Germany, being the EU’s largest exporter to the U.S., faces particular challenges. The nation houses several key automotive manufacturers, including BMW, Volkswagen, and Mercedes-Benz—all now impacted by a new 25% import tariff. Robin Winkler, chief economist for Deutsche Bank Research, noted that while the 20% tariff was anticipated, the higher U.S. levies on imports from Asia were a disconcerting surprise, suggesting a more profound global trade shock.
The Federal Association of Wholesalers, Foreign Trade and Services (BGA) criticized Trump’s tariff measures, calling them a “frontal attack” on global trade. BGA President Dirk Jandura warned that prolonged trade conflicts could lead to significant economic repercussions not just for Europe but also for the U.S.
Retail Sector Repercussions
Retailers with global supply chains that span Asia are also bracing for the impact of these new tariffs. Countries such as Cambodia and Vietnam, which manufacture clothing and various consumer goods for brands like H&M and Adidas, face tariffs that could exceed 40%. Ian Worth from Crowe consultancy pointed out that these tariffs could jeopardize many exporters’ profit margins, potentially forcing them to pivot toward markets with more favorable trade agreements.
Logistics and Shipping Industry
Logistics companies are also feeling the tremors as they forecast a slowdown in economic activity and trade. Danish shipping giant Maersk has indicated that the new tariff structure will likely lead to caution among its customers, adversely affecting the global economy. Shares of shipping firms like Maersk fell 9.5%, with similar declines in Hapag-Lloyd and DSV.
Banking Sector Vulnerability
The banking sector experienced one of the steepest declines on Thursday, with the regional Stoxx Banking index falling 4.52%, marking its most significant drop in two years. Banks are particularly sensitive to shifts in global growth and the risks associated with potential recessions. Standard Chartered, heavily invested in Asian markets, saw its shares drop by 10%, while HSBC declined by 7.5%.
Automotive Industry Impact
Automakers faced immediate repercussions from the initiation of a 25% tariff on foreign auto imports, leading many top manufacturers to record further losses. Companies like Volkswagen and BMW traded more than 2% lower, while Stellantis—owner of brands such as Jeep and Fiat—fell 3.5%. There are concerns that increasing trade tensions could significantly disrupt the automotive industry, particularly given the interconnected nature of supply chains across North America.
Currency Market Reactions
In contrast to the broader market decline, European currencies rallied, with the euro and British pound reaching six-month highs amidst the turmoil. Market analysts had anticipated a favorable outlook for these currencies in light of the new tariffs. Jordan Rochester from Mizuho EMEA pointed out that the euro could reach $1.12 shortly, although he predicted potential limits to the dollar’s depreciation as the euro approached this threshold.
Pharma Sector Movements
The pharmaceutical industry saw a marginal decline, with the Stoxx Pharmaceuticals and Biotechnology index down about 1.9%. However, notable gains were made by British pharmaceutical giants GSK and AstraZeneca, which saw their shares rise by 2.7% and 1.5% respectively, while Danish firm Novo Nordisk’s performance remained stable.
Utilities Outperform
Utilities, traditionally perceived as stable investments during market fluctuations, managed to post gains amidst the turbulence, with the sector rising by 2.6%. Companies such as France’s Engie and Spain’s Iberdrola, which reported a 52-week high, led the charge, demonstrating that not all sectors are equally affected by the unfolding economic drama.
Source
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