European Equities: Navigating Trade Tariffs and Tech Opportunities

As the U.S.-EU trade war looms closer to its August 1, 2025 deadline, European equities face a precarious balancing act between geopolitical risks and sector-specific opportunities. With tariffs threatening to disrupt €4.4 billion in daily trade and the Federal Reserve's rate policy hanging in the balance, investors must prioritize resilience in tech, utilities, and automotive while hedging against tariff-driven volatility.

Geopolitical Crossroads: Trade Tensions and Sectors at Risk

The U.S. threat of 30% tariffs on all EU imports has exposed vulnerabilities in key sectors:
- Automotive: U.S. tariffs on non-USMCA-compliant vehicles (25%) and retaliatory EU countermeasures targeting €21 billion in U.S. goods could squeeze margins for companies like BMW and Renault.
- Aluminum/Steel: U.S. tariffs of 25–50% on imports have driven up costs for manufacturers, though exemptions for UK aerospace products (e.g., Rolls-Royce) offer a glimmer of relief.
- Tech and Pharmaceuticals: U.S. investigations into Section 232 tariffs on semiconductors and critical minerals, paired with EU countermeasures on U.S. tech exports, underscore the sector's fragility.

The EU's delayed countermeasures until August 1 and divided member-state strategies—France's aggressive stance vs. Germany's pragmatism—add to uncertainty. A worst-case scenario of fully implemented tariffs could reduce transatlantic trade by 30%, per EU estimates. Investors should monitor negotiations closely, with a resolution before August 1 offering a near-term catalyst for rebound in tariff-hit stocks.

Tech Sector Resilience: Orsted and NVIDIA Lead the Charge

Amid the chaos, select tech and renewable firms are proving immune to geopolitical headwinds.

Ørsted: Wind Power's Champion

Morgan Stanley's upgrade to Overweight (target price DKK 360) reflects Ørsted's robust Q1 2025 performance:
- 18% EBITDA growth to DKK 8.9 billion, driven by offshore wind farms like Gode Wind 3.
- 99% renewable generation post-coal plant closure.

Despite challenges—cancellation of the Hornsea 4 project and DKK 1.2 billion tariff-related impairments—the company's pivot to value-over-volume strategy and farm-down proceeds (Dkk 7 billion) position it to capitalize on renewable energy demand.

NVIDIA: AI's Unstoppable Engine

NVIDIA's fiscal 2025 results underscore dominance in AI-driven growth:
- 78% YoY revenue jump to $39.3 billion in Q4, fueled by Blackwell supercomputers and data center demand.
- $35.6 billion in data center revenue highlights AI's structural tailwinds.

While gaming revenue dipped 22% QoQ, AI and automotive partnerships (e.g., Toyota's autonomous systems) ensure long-term resilience. NVIDIA's $43 billion revenue guidance for Q1 2026 reinforces its leadership in a sector critical to global tech infrastructure.

Fed Rate Cuts: A Backstop for European Equities

The Federal Reserve's July 28–29 meeting offers a critical inflection point. Market-implied odds of a rate cut by end-2025 are now 50%, up from 5% in July, as inflation moderates and tariff-driven supply chain pressures ease.

A delayed cut (post-August) could pressure rate-sensitive sectors like telecoms, but it would also reduce the likelihood of a “super-negative” tariff scenario. Investors should overweight utilities (e.g., Ørsted's stable cash flows) and tech (NVIDIA's AI moat) while underweighting telecoms, which face regulatory headwinds and slower growth.

Sector Prioritization: Where to Bet Now

• Overweight Automotive: Short-term pain may yield long-term gains if U.S.-EU tariffs are resolved. Focus on companies with tariff exemptions or diversified supply chains.
• Overweight Tech: NVIDIA's AI dominance and Ørsted's renewables leadership offer asymmetric upside.
• Overweight Utilities: Ørsted's 99% renewable portfolio and stable demand make it a defensive play.
• Underweight Telecoms: Sluggish growth and regulatory risks (e.g., EU's Digital Markets Act) limit upside.

Final Call: Navigate with Precision

The path forward is fraught with uncertainty, but selective exposure to tech and utilities—coupled with a focus on tariff-exempt or resolution-sensitive sectors—can yield outsized returns. Monitor the August 1 deadline closely: a negotiated pause or reduction in tariffs could spark a late-summer rally. For now, position for resilience:
- Buy Ørsted (target DKK 360) and NVIDIA (target $750+).
- Avoid telecom stocks until sector-specific catalysts emerge.

The transatlantic trade war is far from over, but the smart investor will find gold in the wind farms and data centers weathering the storm.