Europe Reacts to Trump’s Tariffs: Luxury and Auto Sectors Hit Hard, Utilities and Pharma Show Resilience

Brussels/London — Europe woke up to market turmoil Thursday morning as U.S. President Donald Trump’s sweeping new tariff policy sent shockwaves through the continent’s major economies. With “reciprocal tariffs” now in place against more than 180 countries and territories, including a 20% levy on European Union goods and 10% on U.K. imports, investors scrambled to reposition their portfolios.

While the broader market stumbled, sector-wise reactions were mixed—some industries braced for a deepening crisis, while a few surprising bright spots emerged.

Luxury Sector: Heavily Exposed, Deeply Affected

European luxury stocks led the decline on Thursday. The Stoxx Luxury 10 Index shed nearly 4.8%, echoing fears over reduced American demand for high-end European fashion and accessories.

• Burberry dropped 8.3%

• LVMH fell 4.8%

• Kering lost 5%

Citi analysts highlighted that brands such as Birkenstock, Brunello Cucinelli, and Pandora generate between 31% and 47% of their sales from the U.S., making them particularly vulnerable to the newly imposed duties.

Autos: A Direct Hit for Germany and the Continent

The German auto industry, a cornerstone of European manufacturing, suffered significant blows after Trump imposed 25% tariffs on foreign auto imports.

• Volkswagen, Mercedes-Benz, and BMW all dropped more than 2%

• Italy’s Stellantis declined 3.5%

The sector, already navigating a global EV transition, now faces higher costs and potential sales drops in its largest export market.

Germany’s Federal Association of Wholesalers (BGA) called the move “a frontal attack on world trade,” warning of long-term consequences to economic growth.

Retail and Food: Supply Chains Under Siege

Retailers and food manufacturers—especially those with strong Asian supply chains—found themselves in the crosshairs. New levies on countries like Vietnam, Cambodia, and Bangladesh exceeded 40%, impacting major apparel exporters.

• Adidas and H&M saw declines of over 2%

• Pernod Ricard dropped 2.5%, and Heineken fell 1.3%

• Tate & Lyle, a sugar and sweetener giant, lost 2.6%

Industry voices warned of profitability threats and the urgent need to diversify manufacturing bases and target new markets.

Shipping and Logistics: Feeling the Chill

Shipping companies bore the brunt of deteriorating trade expectations. Maersk, a bellwether for global trade, warned of shrinking customer demand amid economic uncertainty.

• Maersk shares slumped 9.5%

• Hapag-Lloyd dropped 8%

• DSV slid 6.5%

Their losses reflect market fears that global supply chains may suffer prolonged disruptions.

Banking Sector: Recession Risk Takes a Toll

European banks mirrored global concerns, with the Stoxx Banking Index falling 4.52%, its worst session in nearly two years.

• Standard Chartered, heavily exposed to Asia, dropped 10%

• HSBC lost 7.5%

• Broader Eurozone lenders retreated as growth forecasts dimmed

Utilities: A Safe Haven in a Storm

In stark contrast, European utility stocks emerged as one of the day’s few winners. Investors turned to traditionally defensive assets, pushing the utilities index up 2.6%.

• Engie (France) rose 2.7%

• Iberdrola (Spain) gained 2.7%, hitting a new 52-week high

Pharmaceuticals: Shielded—For Now

While healthcare stocks were not immune to Thursday’s market turmoil, the pharma sector escaped Trump’s initial tariff net. European leaders cautiously welcomed the reprieve, even as the White House hinted at potential future investigations.

• GSK rose 2.7%

• AstraZeneca added 1.5%

• Novo Nordisk remained stable

Still, uncertainty looms as Trump hinted pharmaceuticals could eventually come under review.

Currencies: Euro and Pound Find Strength

European currencies bucked the downtrend, rallying against the dollar as investors bet on U.S. economic instability and global policy divergence.

• The euro rose 2.2% to $1.108, nearing a six-month high

• The British pound touched its strongest level since late 2024

• The Swiss franc gained on safe-haven demand

Currency analysts expect further gains in the short term, although some warned of a potential pullback if the euro crosses the $1.11 threshold.

Conclusion: Bracing for a New Economic Reality

Europe's response to Trump's tariffs was swift and dramatic, highlighting the continent’s deep trade ties with the U.S. As political leaders prepare countermeasures and businesses weigh strategic pivots, investors are left navigating a shifting global landscape.

"This could be the beginning of a redefined world trade order," said Jean-Claude Marceau, trade analyst at Geneva Policy Forum. "For Europe, adaptability will determine who emerges bruised—and who comes out stronger."