Business

Trump’s Tariff Threats Loom Over Europe’s 2025 Growth, Wall Street Warns

Published

3 hours ago

February 5, 2025

RTX

Europe’s economic recovery could be at risk in 2025 as top Wall Street analysts warn that potential tariffs from former U.S. President Donald Trump’s administration may derail growth. Experts from Goldman Sachs and JPMorgan suggest that the eurozone’s GDP could slow to 0.7%, well below the 1.1% forecast by the European Central Bank (ECB) in December.

Trade Uncertainty Weighs on Markets

With Trump’s potential return to the White House, analysts fear that renewed trade disputes between Washington and Brussels could pressure Europe’s fragile recovery. While the EU was not included in the first wave of U.S. tariffs—which affected Mexico, Canada, and China—Trump has hinted that the bloc could be next due to its large trade surplus with the U.S.

Goldman Sachs’ chief European economist Sven Jari Stehn estimates that a 10% tariff on all U.S. imports from the EU—if fully reciprocated—could erase one percentage point from euro area growth.

Beyond GDP, corporate earnings are also at risk. Goldman Sachs projects European earnings per share (EPS) growth of just 3% in 2025, far below the 8% market consensus. Analysts stress that the primary concern is not just the tariffs but the uncertainty they create, which could stifle investment and business confidence.

Sectors Most at Risk

The EU accounts for 15% of total U.S. imports, with key industries such as machinery, pharmaceuticals, chemicals, and automobiles particularly exposed. Analysts warn that car manufacturers and cyclical industries—which rely on global supply chains—face the highest risk of disruption.

However, healthcare and high-margin defensive sectors may fare better. The so-called “GRANOLAS” stocks—which include GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi—have underperformed recently but historically perform well when trade tensions rise.

Can a Weaker Euro Offset the Impact?

A declining euro could provide some relief to European exporters, particularly multinational firms with significant U.S. revenue exposure. Goldman Sachs predicts the EUR/USD exchange rate will fall to 0.97 within 12 months, with GBP/USD weakening to 1.20.

However, analysts caution that a weak euro does not guarantee stock market gains. A stronger U.S. dollar has historically led to underperformance in non-U.S. markets, as dollar-based investors face currency translation losses unless hedged.

“Euro weakening usually coincides with rising risk premiums, offsetting any competitiveness advantages,” Goldman Sachs strategists noted.

EU Retaliation Strategy Unclear

Europe’s response to potential U.S. tariffs remains uncertain. According to JPMorgan economist Nora Szentivanyi, the EU Commission has vowed to retaliate firmly, but the specific timing and scope of its response remain unclear.

If Brussels follows its 2018 trade war playbook, it may impose steep tariffs—possibly over 50%—on politically sensitive U.S. exports, targeting sectors that could hurt Trump’s voter base the most.

JPMorgan estimates that trade policy uncertainty has already cut 0.5 percentage points from Europe’s annualized growth over the past year. Any new tariff threats could further weaken the region’s economic outlook.

US-EU Trade Talks Underway

Amid growing concerns, U.S. Treasury Secretary Scott Bessent met with ECB President Christine Lagarde on Tuesday to discuss transatlantic trade policies. While no official details were disclosed, the meeting signals that Washington and Brussels are closely monitoring rising trade tensions.

As financial markets await clarity on U.S. trade policy, analysts warn that investors and businesses must brace for a turbulent 2025.

Business

Alphabet Shares Drop as Google Cloud Growth Slows, Capex Surges

Published

3 hours ago

February 5, 2025

RTX

Alphabet Inc., the parent company of Google, reported disappointing fourth-quarter earnings, missing analysts’ revenue estimates due to slower-than-expected growth in Google Cloud. The company’s stock tumbled over 7% in after-hours trading, as investors reacted to both the cloud division’s deceleration and plans for aggressive capital expenditures in 2025.

Alphabet announced it would spend approximately $75 billion (€72.73 billion) on capital investments this year, exceeding Wall Street’s expectations. The spending will be focused on data centers and artificial intelligence (AI) infrastructure, a move that has raised concerns over its return on investment.

Despite the cloud slowdown, Alphabet’s core businesses—Google Search and YouTube advertising—continued to deliver strong results. CEO Sundar Pichai remained upbeat, stating, “Q4 was a strong quarter driven by our leadership in AI and momentum across the business … We are confident about the opportunities ahead and accelerating our progress.”

Google Cloud Growth Decelerates

Google Cloud reported $11.96 billion (€11.60 billion) in revenue for the fourth quarter, falling short of Wall Street’s forecast of $12.19 billion (€11.82 billion). While the division grew 30% year-on-year, it marked a slowdown from the 35% growth in the previous quarter. Quarter-over-quarter growth also slowed to 5.4%, down from 9.6% in Q3.

By comparison, Microsoft’s cloud business posted 31% growth, highlighting the competitive pressure Google Cloud faces from both Microsoft Azure and Amazon Web Services (AWS).

Alphabet’s overall revenue rose 12% year-on-year to $96.47 billion (€93.58 billion), just missing analyst expectations of $96.56 billion (€93.64 billion). Google Services—including Search, YouTube, and other ad-driven businesses—generated $84.09 billion (€81.56 billion), up 10% from last year.

Pichai emphasized the company’s AI-driven expansion, saying, “Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to lead in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion.”

Alphabet also announced it would pay $2.4 billion (€2.33 billion) in dividends to shareholders for the quarter ending December 31, 2024.

Waymo’s Robotaxi Expansion Faces Challenges

Alphabet’s Other Bets division, which includes Verily (life sciences) and Waymo (autonomous vehicles), saw revenue fall 39% year-on-year to $400 million (€388 million). The segment reported a widening operating loss of $1.17 billion (€1.13 billion), compared to $863 million (€837 million) in the previous quarter.

Waymo, one of the first U.S. robotaxi services, currently operates in Los Angeles, San Francisco, and Phoenix. It faces competition from Tesla’s Cybercab, but remains ahead in deploying self-driving technology.

The company recently announced plans to expand into Tokyo in early 2025, marking its first international market. Additionally, it aims to extend testing in 10 new U.S. cities, including San Diego and Las Vegas, this year.

While Alphabet remains optimistic about its AI and cloud advancements, investors remain cautious about the company’s rising expenditures and the long-term profitability of its autonomous vehicle ventures.

Business

Diageo Faces Uncertainty as U.S. Tariff Threat Looms Over North American Sales

Published

1 day ago

February 4, 2025

RTX

UK-based drinks giant Diageo plc has warned that escalating trade tensions in North America could significantly impact its business, with potential losses of up to $200 million (€193.7 million) in the second half of 2025 if threatened U.S. tariffs on Canada and Mexico take effect.

Diageo, which owns more than 200 brands including Guinness, Johnnie Walker, Baileys, and Captain Morgan, exports whiskey from Canada and tequila from Mexico to the U.S., its largest market. With North America generating the highest net sales volume for Diageo, any new tariffs could have far-reaching financial consequences.

On Tuesday, the company reported its financial year 2025 interim results, revealing lackluster performance in the last quarter and announcing the removal of its medium-term sales growth target of 5-7%, citing uncertainty over the global trade environment.

U.S. Tariffs Delayed but Risks Remain

U.S. President Donald Trump had planned to impose 25% tariffs on Canadian and Mexican goods on Tuesday, but following talks with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum, the move has been postponed for a month. However, analysts warn that Diageo remains vulnerable if the tariffs are implemented.

Following the announcement, Diageo’s share price fell 1.3% on Tuesday afternoon, reflecting investor concerns about the company’s exposure to trade disputes.

Disappointing Financial Performance

Diageo’s latest earnings report showed a slight decline in net sales, with reported revenue at $10.9 billion (€10.6 billion), down 0.6%, mainly due to foreign exchange challenges. Organic net sales grew just 1% to $101 million (€97.8 million), while operating profit fell 4.9%, also affected by currency fluctuations.

CEO Debra Crew remained optimistic, highlighting that Diageo continues to gain market share in four out of five global regions.

“We outperformed the market in North America with high-quality share growth and positive organic net sales growth, driven by strong execution and momentum in Don Julio and Crown Royal,” Crew said in the earnings statement.

She also praised the success of Guinness, which delivered double-digit growth for the eighth consecutive half-year period, attributing the rise to brand building, innovation, and increasing global demand.

However, sales of premium spirits like Tanqueray, Gordon’s, and Smirnoff have been under pressure, as consumers turn to cheaper alternatives due to the ongoing cost-of-living crisis.

Analysts React to Diageo’s Results

Market analysts had mixed reactions to Diageo’s performance and decision to withdraw its medium-term sales forecast.

Chris Beckett, head of research at Quilter Cheviot, described the results as “satisfactory”, noting that organic sales rose slightly while profits dipped marginally, indicating a stabilization in performance. However, he warned that the removal of sales guidance may be negatively received by investors.

Russ Mould, investment director at AJ Bell, said Diageo’s uncertain outlook and external challenges have weighed on investor confidence.

“Diageo has had little good news to toast so far in 2025. First, the threat of cancer warning labels on its drinks emerged, and now the company has withdrawn its medium-term guidance,” Mould said.

He added that if the U.S. tariffs are imposed, Diageo will need to test its pricing power to see if it can pass higher costs onto consumers.

Future Outlook

Diageo’s earnings per share (EPS) fell 9.6%, mainly due to weaker performance from Moët Hennessy. The company is also struggling with lower global demand for premium spirits, as inflationary pressures push consumers toward budget-friendly brands.

Despite the challenges, Diageo reassured investors that it would provide more frequent trading updates and near-term guidance. However, with U.S. tariffs looming and shifting consumer spending habits, the company faces significant headwinds in the months ahead.

Business

Global Markets in Turmoil as U.S. Tariffs Trigger Trade War Fears

Published

2 days ago

February 3, 2025

RTX

Global financial markets plunged into turmoil on Monday following U.S. President Donald Trump’s decision to impose sweeping tariffs on Canada, Mexico, and China, escalating fears of an all-out trade war.

Trump Moves Ahead with Tariffs Despite Global Concerns

On Saturday, President Trump signed an executive order imposing 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese goods, set to take effect Tuesday. To mitigate potential spikes in energy costs, Canadian energy imports will face a reduced 10% tariff.

In response, Canada, Mexico, and China have all signaled retaliatory measures, further raising economic uncertainty. Trump warned that any countermeasures could prompt higher or expanded tariffs on their exports.

Market Fallout: Euro Plunges, Stocks Tumble

Global markets reacted sharply to the announcement, with major currencies and equities sliding amid heightened trade tensions.

The Canadian dollar fell to its lowest level in over two decades against the U.S. dollar.
The Mexican peso dropped to a four-year low.
The euro slumped over 1%, hitting its weakest level in more than two years.
Commodity-linked currencies such as the Australian and New Zealand dollars also saw steep declines of around 2% against the U.S. dollar.

In commodities trading, crude oil prices surged 4%, initially reacting to potential supply disruptions before retreating due to the lower tariff on Canadian energy. Meanwhile, gold, silver, and copper prices declined as a strengthening U.S. dollar weighed on metal markets.

Cryptocurrencies also suffered amid broader market turmoil. Bitcoin fell from $101,000 (€99,000) over the weekend to just above $94,000 (€92,000) by early Monday morning.

Stocks Hit Hard, Auto Industry Faces Pressure

Equity markets in Asia, Europe, and North America opened lower, while U.S. and European stock futures tumbled. The hardest-hit sector was automobiles, particularly European car manufacturers with production in Mexico.

BMW, Volkswagen, and Mercedes-Benz saw pre-market declines amid concerns over U.S. tariffs on Mexican-made vehicles.
Stellantis and Renault also faced selling pressure, with investors fearing prolonged trade disruptions.

Analysts warned that risk-off sentiment would likely dominate the week.
“This week, investors are likely to go risk-off—particularly as Trump has said he is unfazed by the market reaction,” said Josh Gilbert, a market analyst at eToro Australia.

Government Bonds and Inflation Risks

Government bonds—typically seen as safe-haven assets—were in focus as investors sought stability. However, Trump’s tariffs and the potential for retaliation raised concerns about global inflation, complicating monetary policy decisions for central banks in the U.S. and the EU.

Canada, Mexico, and China Prepare Countermeasures

In response to the U.S. tariffs, Canadian Prime Minister Justin Trudeau announced 25% tariffs on $155 billion (€102.8 billion) worth of U.S. goods, targeting alcohol, agriculture, consumer products, and raw materials.

Tariffs on $30 billion (€19.9 billion) worth of goods will take effect immediately on Tuesday.
Analysts warn that the economic blow could push Canada into a recession, marking its first economic contraction since the pandemic.

Meanwhile, Mexican President Claudia Sheinbaum said Mexico was preparing a “Plan B” involving tariff and non-tariff measures to protect its economy. Details are expected to be announced later Monday.

In China, the Ministry of Commerce strongly condemned the U.S. decision, calling it a “serious violation of WTO rules.”

Beijing plans to file a complaint with the World Trade Organization (WTO) while keeping diplomatic channels open for negotiations.
A government spokesperson urged the U.S. to “correct its wrongful actions” and “work with China” to de-escalate tensions.

As trade tensions escalate, global markets brace for more volatility, with investors watching for further U.S. policy moves and retaliatory measures from affected nations.