Europe’s earnings season shows tariffs are biting hard as EU scrambles for Trump deal

Earnings season just exposed exactly how much Europe is bleeding from Donald Trump’s latest round of tariffs.

Industrial and consumer-facing companies across the region are now reporting weaker profits, rising expenses, and slower investment as the impact of U.S. trade policies finally crashes into their bottom lines. 

What started as a mild 0.2% drop in expected profits for firms on the Stoxx Europe 600 index has now become a projected 0.7% decline, according to LSEG, as more companies speak out about the real-world consequences of escalating trade tensions.

Europe’s profit margins are slim

The biggest names in manufacturing are already taking hits. Jaguar Land Rover, owned by Tata Motors, said its retail sales dropped 15.1% for the quarter that ended June 30. The company blamed a complete stop in U.S.-bound shipments in April, directly linked to the new American import tariffs.

Volvo Group’s CEO, Martin Lundstedt, said weak North American demand, driven by both the tariffs and the Environmental Protection Agency’s 2027 emissions rules, forced them to “reduce production capacity” on that side of the Atlantic.

Norway-based Tomra Systems, which builds machines for recycling waste, said its clients are now backing off from buying new equipment. In its own words, customers are hesitating due to “macroeconomic and tariff uncertainty,” which has started delaying investment decisions across the board.

The same mood has taken hold at Swiss industrial heavyweight ABB. The company said buyers in its robotics division are now in a “wait-and-see mode” because of continued tariff complications, which has already led to project delays.

EU lines up countermeasures while pushing talks

With less than two weeks until Trump’s self-imposed August 1 deadline, officials in Europe are scrambling to stop another wave of duties. Negotiations between the European Union and the United States are happening behind closed doors, but there’s no guarantee they’ll end in a deal. If they don’t, Brussels is preparing to retaliate.

White House press secretary Karoline Leavitt said the European side is “very eager” to strike a trade agreement. She told reporters Thursday that Brussels is finally exploring “ways to lower their tariff and their non-tariff barriers that we have long said harm our workers and our companies.”

But while public talk suggests cooperation, behind the scenes, Brussels is building a legal and political wall of countermeasures.

Michal Baranowski, Poland’s undersecretary at the Ministry of Economic Development and Technology, broke down the plan in an interview with CNBC’s Europe Early Edition. “The first part of the EU’s strategy is to negotiate with U.S. officials in good faith,” he said. 

“The second one is, let’s prepare for countermeasures in case we don’t [reach a deal]. And we have countermeasures on both the steel and aluminium tariffs as well as the initial package of 72 billion [euros] for so-called reciprocal tariffs.”

Baranowski said they’re also watching other countries in similar situations to get a broader view of how everyone else is responding, though coordination isn’t the goal. Baranowski also made it clear that the transatlantic trade link is vital for both sides, saying, “Washington has as much to gain or to lose from this relationship as Europe.”

His remarks came shortly after Maros Sefcovic, the EU’s top trade official, visited Washington for further discussions. But the urgency is clear. The U.S. and EU are tied together in the biggest trade and investment partnership on Earth.

Together, they account for nearly 30% of the world’s trade in goods and services and 43% of the world’s GDP. In 2024, total trade between the two hit 1.68 trillion euros, or around $1.96 trillion.

That breaks down to 4.6 billion euros in daily transactions; money that both sides depend on to keep jobs, supply chains, and businesses moving.

Trump has repeatedly complained that this relationship is unfair. He continues to point at the EU’s trade surplus with the U.S. as proof that Europe is taking advantage of American industry.