Barclays has reported that a group of European exporters—companies particularly susceptible to tariffs—has underperformed the Stoxx Europe 600 benchmark by 15% since early spring. This decline is attributed to investors anticipating the potential implementation of Donald Trump’s proposed tariff policies, a key aspect of his presidential election platform, amid expectations of his electoral success.
“Tariff concerns have weighed heavily on the relative performance of EU equities year-to-date,” stated Barclays analysts, led by Emmanuel Cau, in a Wednesday report. They cautioned that in the event of a full-scale trade war, earnings per share (EPS) growth could be impacted by as much as a high single-digit percentage, particularly affecting sectors such as Germany, Italy, capital goods, automotive, beverages, technology, and chemicals.
The report also noted that some European companies had shifted production to the U.S. since 2018, which may mitigate the overall impact of Trump’s trade policies should he be re-elected. However, Barclays remains concerned about the broader repercussions, particularly the secondary effects of lower growth and higher inflation—potentially leading to stagflation—especially in the case of retaliatory actions and an escalated trade war.
The United States would also feel the repercussions of such policies. Barclays predicts that Trump’s tariffs could result in a 3.2% decline in S&P 500 earnings per share next year, with materials, discretionary spending, industrials, technology, and healthcare sectors facing the most significant negative impacts. Moreover, retaliatory tariffs could inflict an additional 1.5% hit to forward EPS.
Conversely, the note suggested that European markets could experience a rebound if Vice President Kamala Harris were to win the election. Her policies are expected to favor clean energy and renewable sectors in the region, which have also struggled under the shadow of a potential Trump victory.
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