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Trump’s Tariff Threats Could Hit Europe’s Key Sectors

In 2023, Europe exported $502 billion worth of goods to the US, with projections indicating this will grow to nearly $606 billion in 2024. However, if Donald Trump’s tariff threats are realized, European exports could face substantial challenges. The biggest risks will affect the healthcare, industrials, and consumer staples sectors, which are expected to contribute over half of the Stoxx Europe 600’s earnings growth this year.

Pharmaceuticals And Automakers Face Major Risks

Pharmaceutical companies are particularly exposed. For instance, Novo Nordisk generates 58% of its revenue from the US, while Sanofi generates almost 50%. The automotive and semiconductor industries will also be heavily impacted. Automakers, who account for 10% of European exports to the US, could suffer from the new 25% tariffs on imports from Mexico and Canada, scheduled to take effect on March 6. Companies like Stellantis, Volkswagen, BMW, and Mercedes-Benz could face a €6 billion ($6.3 billion) hit in operating profits. Volkswagen, for example, relies on Mexico for 65% of its US-bound cars, potentially forcing the company to either ramp up US production or exit the market entirely.

Industrial Sector At A Disadvantage

The industrial sector is also at risk, especially for companies relying on global supply chains. Further tariffs on machinery and equipment could add to the challenges facing European exporters. A 10% to 20% tariff on pharmaceuticals, cars, machinery, and alcoholic beverages could reduce sales by 1.1% to 2.1% and operating profits by 3.3% to 6.6%, according to Bloomberg Intelligence.

Premium Carmakers Could Weather The Storm

Some premium carmakers, like BMW and Mercedes-Benz, may be better positioned to absorb the additional costs, as their customer base tends to accept price increases. However, many sectors will still face significant strain.

A History Of Negotiations With Trump’s Administration

Europe’s experience with Trump’s trade policies is not new. In 2018, the EU avoided new tariffs through negotiations that included commitments to import more US liquefied natural gas. This experience has helped large industrial companies localize their supply chains to better withstand future challenges. But, with the potential for tariffs in 2025, the outlook remains uncertain. According to Goldman Sachs, S&P 500 companies could see a 2% to 3% drop in earnings per share if tariffs are imposed. This would either reduce profit margins or lead to declining sales as companies pass on the costs to customers.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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