U.S. President Donald Trump’s shifting approach to tariffs is causing concern among smaller European businesses, leading some to question the benefits of expanding into the U.S. market. This reflects the growing challenges companies face in navigating trade with the world’s largest economy.
Trump’s tariffs target a wide range of goods—from steel and cognac to cars and sandals. The goal is to incentivize foreign companies to invest in the U.S., building factories and creating American jobs. While major corporations, especially in the automotive and pharmaceutical sectors, have moved forward with expansion plans, smaller companies are becoming more cautious due to the unpredictability of tariffs and their economic impacts.
EuroGroup Laminations, an Italian company that supplies rotors and stators to U.S. automotive giants like Ford and GM, currently avoids tariffs on products manufactured in Mexico. However, moving production to the U.S. would expose the company to tariffs on specialized steel and significantly higher labor costs. CEO Marco Arduini explained that the costs of relocating would likely outweigh the benefits of avoiding tariffs.
Similarly, German company ebm-papst, a manufacturer of fans and motors, has paused plans to build a third U.S. factory. CEO Klaus Geissdoerfer cited concerns that the tariffs could trigger a recession, which might alter demand for their products in the U.S.
Small and medium-sized enterprises (SMEs) in Europe, crucial to the economies of countries like Italy and Germany, often lack the financial buffers of larger corporations. As a result, they are more vulnerable to sudden trade policy changes. Marc Tenbieg, head of the German SME association DMB, noted that Trump’s protectionist policies are unlikely to attract more German companies to the U.S. and may even prompt some to reconsider their U.S. operations.
The VDMA, a German engineering group, reported that some of its members are delaying investments or purchases in the U.S. due to the uncertainty surrounding tariffs. Industry experts say many companies are taking a “pause and monitor” approach until the full impact of Trump’s trade policies becomes clearer.
In response to growing trade tensions, Trump imposed a series of broad tariffs in April, including a 20% tariff on EU imports, which was later reduced to 10% after a brief suspension. His repeated criticism of foreign trade practices, particularly the $235.6 billion trade deficit with the EU, has escalated diplomatic tensions.
Despite the uncertainty, some companies are continuing with U.S. expansion plans. Germany’s LAPP, which manufactures cables, wires, and robotics, remains committed to doubling its production capacity at its New Jersey facility in 2025. CEO Matthias Lapp emphasized that long-term business planning, rather than short-term political fluctuations, drives their decisions.
The uncertainty surrounding tariffs is also affecting consumer spending in the U.S. According to RBC Capital, 10% of U.S. consumption is based on imports, making it difficult for consumers to shift away from imported goods. AlixPartners predicts that U.S. household discretionary spending could fall by over 10% as a result of tariffs, prompting some businesses to reconsider their strategies.
The EU remains the U.S.’s largest trading partner, with exports exceeding €500 billion annually, primarily in pharmaceuticals, vehicles, and machinery. However, trade friction with the U.S. has led some European leaders, including French President Emmanuel Macron, to advise companies to delay planned investments.
Industry groups are now recommending that European companies explore alternative markets in regions like India, Latin America, and Southeast Asia to reduce their exposure to the uncertainties of U.S. trade policies.
Sebastian Zank of the credit ratings agency Scope summed up the current mood: “Everyone is taking a wait-and-see approach until a clearer, more sustainable picture emerges.”
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