Impact of US-EU Trade Tensions on European Multinational Companies

Based on my comprehensive analysis of the current US-EU trade tensions and their potential impact on European multinational companies, I can now provide you with a detailed assessment.

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Escalating US-EU trade tensions, intensified by Ireland’s warning of EU retaliation against new US tariffs and the ongoing dispute over Greenland, present significant risks to European multinational corporations. The analysis reveals a differentiated impact across sectors, with

, while certain companies demonstrate remarkable resilience driven by AI demand and structural adaptations.

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The transatlantic trade relationship has deteriorated significantly since early 2025. Key developments include:

• March 2025
  : EU announced retaliatory tariffs in response to US steel and aluminum tariffs [1]
• April 2025
  : EU member states voted to impose countermeasures (10-20% tariffs) on US exports [1]
• July 2025
  : EU suspended countermeasures for six months following trade negotiations [1]
• August 2025
  : A 15% tariff on EU automobiles was implemented (reduced from proposed 25%) [2]
• January 2026
  : Trump threatened tariffs on countries supporting Greenland security, prompting EU to consider halting the trade deal [3][4]

Irish Foreign Minister Helen McEntee characterized the US position as “completely unacceptable and deeply regrettable,” emphasizing that “respect for sovereignty and territorial integrity of States is non-negotiable” [3].

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The automotive sector faces the most severe tariff-related headwinds:

Company	Tariff Impact	Stock Performance (90-Day)	Key Developments
Volkswagen	Very High	+11.06%	Reported $1.52B Q3 loss linked to EV strategy and tariffs [5]
BMW	Very High	+4.57%	No US production; fully exposed to 15% auto tariff
Mercedes-Benz	Very High	Flat to +3%	Sales down 12% in China, 19% in US market [5]
Porsche	Very High	-1.3% post-earnings	Expected €700M tariff cost in 2025 [5]

: German vehicle exports to the US declined nearly following the 15% tariff implementation [5]. EY characterized this as “perfect storm” of tariff exposure, cost pressures, and Chinese EV competition [5].

Moody’s estimates that US tariffs will reduce global automakers’ operating profits by

, equivalent to more than 20% of their 2024 earnings [2].

European luxury houses face both direct tariff risks and potential consumer boycotts:

Company	US Revenue Exposure	Stock Performance	Analyst Target
LVMH	~25% of revenue	+16.42%	€639.50 avg [6]
Kering (Gucci)	~20% of revenue	-3.16%	Under pressure [6]
Hermès	~15% of revenue	-0.18%	Most resilient [6]
Richemont	~18% of revenue	-2.09%	Outperformed expectations [6]

: Analysts note that in an escalating tensions scenario, the US could impose restrictions or boycotts on European luxury brands [7]. LVMH shares have declined 39% over the past year amid broader luxury sector weakness [6].

The technology sector presents a complex landscape:

Company	US Exposure	90-Day Performance	Valuation
ASML	High (semiconductor equipment)	+40.70%	47.77x P/E [8]
SAP	Medium (enterprise software)	-12.13%	Under pressure [8]
Siemens	Medium (industrial)	+13.85%	Resilient [8]

: ASML has been the standout performer, with Morgan Stanley raising its price target to €1,400 (implying 20% upside) due to strong AI-related order inflows expected through 2027 [9]. The company trades at approximately , well above its 10-year average of 29-31x [9].

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European corporate earnings face significant downward pressure:

• Q4 2025
  : STOXX 600 companies expected to report a
  4.1% decline
  in earnings (worst in seven quarters) [10]
• Q1 2026
  : Projected decline of
  2.5%
  year-over-year [10]
• Revenue expectations
  : Shrinking 2.9% compared to the prior year [10]

: US S&P 500 companies are forecast to deliver , dramatically outperforming European counterparts [10].

Our analysis reveals:

• Financial Attitude
  : Conservative accounting with high depreciation ratios
• Free Cash Flow
  : -€10.3 billion (latest annual period) [11]
• Debt Risk
  : Moderate risk classification [11]

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Index	90-Day Change	Status
STOXX 600	+10.17%	Record highs reached [12]
DAX (Germany)	+6.49%	Resilient [8]
Euro STOXX 50	+8.2%	Outperforming [12]
FTSE 100	+5.8%	Stable [12]

: Despite tariff uncertainties, the STOXX 600 reached record highs in January 2026, suggesting markets have largely priced in tariff impacts and are focusing on other catalysts [12].

• European Tech Index
  : Trading at approximately
  27x forward earnings
  , broadly in line with US levels [9]
• ASML Premium
  : Commands 43x forward earnings due to AI semiconductor monopoly position [9]
• Luxury Sector
  : Under pressure, with LVMH trading at significant discount to historical averages [6]

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European multinationals are implementing multiple strategies to mitigate tariff exposure:

• Stellantis
  : Announced $13B investment in US production to reduce tariff exposure [13]
• Volkswagen
  : Considering US production expansion despite “diverted capital” from other investments [14]
• BASF
  : Proceeding with Louisiana capacity expansion (scheduled 2026) [14]

• Porsche
  : Pull-forward of US inventory registrations to mitigate tariff impacts [5]
• Automakers
  : Building inventory buffers to preserve near-term margins [15]

• Companies are passing portion of tariff costs to consumers
• Reducing vehicle features/amenities to offset cost increases [2]

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Risk Level	Companies	Investment Implications
Very High	VW, BMW, Mercedes, Porsche, LVMH	Avoid/add defensive hedges; monitor closely
High	ASML, Kering, Richemont	Selective opportunities; valuation-dependent
Medium	SAP, Siemens, Sanofi	Attractive if US exposure manageable
Lower	Nestle, Unilever, LV=	Defensive positioning in consumer staples

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• Tariffs stabilize at current 15% levels for autos
• EU-US trade deal resumes with modifications
• Earnings Impact
  : Moderate (-3% to -5% for exposed sectors)
• Valuation
  : Stable with sector rotation

• Additional tariffs imposed on EU goods (25%+ on autos)
• EU retaliation affects US technology and agriculture
• Earnings Impact
  : Severe (-10% to -15% for automotive/luxury)
• Valuation
  : Multiple compression of 15-25% in exposed sectors

• Comprehensive US-EU trade agreement reached
• Tariffs substantially reduced or eliminated
• Earnings Impact
  : Recovery to +3-5% growth
• Valuation
  : Re-rating of depressed sectors

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1. Reduce automotive exposure
   : Trim VW, BMW, Mercedes positions
2. Underweight luxury
   : Maintain limited LVMH, avoid Kering
3. Favor domestic-focused European companies
   : Companies with <15% US revenue exposure

1. ASML
   : Strong buy on AI-driven semiconductor demand (analyst consensus: BUY) [8]
2. Siemens
   : Industrial exposure offers defensive characteristics [8]
3. Defensive sectors
   : Healthcare and utilities showing relative strength [8]

1. Monitor
   Q4 2025 earnings reports
   (late January 2026) for tariff impact confirmation
2. Watch for
   Supreme Court ruling
   on tariff legality (key catalyst) [12]
3. Track
   EU retaliation announcements
   for escalation signals

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Date	Event	Impact
Jan 28, 2026	ASML Q4 earnings	Semiconductor demand outlook [8]
Late Jan 2026	STOXX 600 Q4 results	Tariff impact confirmation [10]
Q1 2026	Supreme Court tariff ruling	Legal clarity on trade policy [12]
Ongoing	EU-US negotiations	Trade deal progress

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US-EU trade tensions present a

to European multinational earnings, with the impact concentrated in automotive, luxury goods, and select technology exposures. However, the market has already priced significant portions of this risk, as evidenced by:

1. Record-high STOXX 600
   despite tariff headwinds
2. Differentiated stock performance
   (ASML +40% vs. luxury sector weakness)
3. Active corporate adaptation
   through production reshoring and inventory management

The

varies significantly by sector: automotive and luxury face earnings headwinds of 10-20%, while AI-linked technology (ASML) benefits from structural demand growth regardless of tariff environment. Investors should while selectively adding quality names with manageable US exposure and strong competitive positions.

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[1] Congressional Research Service - “Presidential 2025 Tariff Actions: Timeline and Status” (https://www.congress.gov/crs-product/R48549)

[2] Digital Dealer - “U.S. Tariff Tracker: Impact on Automaker Response” (https://digitaldealer.com/news/us-tariff-tracker-impact-automaker-response/164521/)

[3] Bloomberg - “Trump’s Greenland Threats Reopen Tariff Wounds in Europe” (https://www.bloomberg.com/news/articles/2026-01-17/trump-s-greenland-pressure-blitz-reopens-tariff-wounds-in-europe)

[4] Bloomberg - “EU Set to Halt US Trade Deal Over Trump’s New Tariff Threat” (https://www.bloomberg.com/news/articles/2026-01-17/eu-set-to-halt-us-trade-deal-over-trump-s-latest-tariff-threat)

[5] Reuters - “Porsche reports worst sales drop since 2009 on weak China demand” (https://www.reuters.com/business/autos-transportation/porsche-2025-deliveries-drop-10-weak-china-demand-eu-cybersecurity-rules-2026-01-16/)

[6] Investing.com - “Luxury stocks in Europe slip after Richemont tops sales forecasts” (https://ng.investing.com/news/stock-market-news/luxury-stocks-in-europe-slip-after-richemont-tops-sales-forecasts-2291801)

[7] XTB - “Divorce of Europe and the USA over Greenland” (https://www.xtb.com/int/market-analysis/news-and-research/divorce-of-europe-and-the-usa-over-greenland)

[8]金灵AI - Company Overview and Stock Data (ASML, BMW, Volkswagen, SAP, Siemens, LVMH)

[9] XTB - “Capital flows into European technology stocks” (https://www.xtb.com/int/market-analysis/news-and-research/midday-wrap-capital-flows-into-european-technology-stocks)

[10] Reuters - “European corporates expected to deliver worst earnings growth in past seven quarters” (https://www.reuters.com/business/european-corporates-expected-deliver-worst-earnings-growth-past-seven-quarters-2026-01-15/)

[11]金灵AI - Financial Analysis (Volkswagen VOW3.DE)

[12] Investing.com - “Europe’s STOXX 600 ends at record high” (https://www.investing.com/news/economy-news/european-shares-edge-up-as-rwe-sse-auction-win-boosts-utilities-4446224)

[13] Equitable Growth - “U.S. businesses report that tariff policies will likely lead to price increases” (https://equitablegrowth.org/u-s-businesses-report-that-tariff-policies-will-likely-lead-to-price-increases-and-labor-market-impacts-in-2026/)

[14] DW - “German firms hunker down as Trump marks one year in office” (https://www.dw.com/en/german-firms-hunker-down-as-trump-marks-one-year-in-office/a-75524580)

[15] Morgan Stanley - “What’s Driving European Stocks in 2026” (https://www.morganstanley.com/insights/podcasts/thoughts-on-the-market/european-stock-market-2026-outlook-paul-walsh-marina-zavolock)