Dutch Steel, Machinery, and Automotive Sectors Face Trade War Risks—But Resilient Sectors Offer a Path Forward

The Netherlands, a nation built on global connectivity and precision engineering, now finds itself at a crossroads. As U.S.-EU trade tensions simmer, the Dutch economy—deeply integrated into transatlantic supply chains—faces a reckoning. Tariffs, retaliatory measures, and political uncertainty loom over key industries, but beneath the surface, a strategy of strategic diversification and sectoral innovation is emerging. For investors, the challenge is clear: reallocate portfolios to mitigate risks in vulnerable sectors while capitalizing on underappreciated growth areas.

High-Risk Sectors: Steel, Machinery, and Automotive in the Crosshairs

The Netherlands' steel industry is a microcosm of the broader crisis. U.S. tariffs on steel and aluminum—still at 50% despite a quota system—have already strained traditional producers like Tata Steel Nederland. Meanwhile, the EU's Carbon Border Adjustment Mechanism (CBAM) adds another layer of complexity, penalizing carbon-intensive production. Yet, green steel offers a lifeline. ArcelorMittal and smaller innovators like Deltion Innovations are investing in hydrogen-based production, aligning with global decarbonization trends. Investors should monitor these firms, as a resolution in U.S.-EU trade talks could unlock demand for cleaner steel.

Machinery and automotive sectors are equally exposed. ASML and ASM, leaders in semiconductor equipment, have seen demand rebound as chipmakers rebuild inventories. However, a 15% U.S. tariff on EU goods—excluding aircraft and semiconductors—threatens to erode margins. Dutch automotive parts manufacturers, already grappling with U.S. tariffs on steel and aluminum, face a shrinking market. The solution? Diversify into markets less entangled in the transatlantic dispute.

Strategic Diversification: Southeast Asia, Latin America, and Africa as New Frontiers

The Netherlands is pivoting to alternative markets, with Southeast Asia emerging as a critical destination. Vietnam, Thailand, and Indonesia—driven by infrastructure booms and industrialization—are becoming hubs for Dutch machinery and steel. Vietnam, in particular, has seen a surge in demand for electrical machinery, as U.S. tariffs on Chinese goods push manufacturers to reorient supply chains.

In Latin America, Brazil and Mexico are key. Brazil's privatization of water utilities and climate-driven infrastructure needs create demand for Dutch water-tech and machinery. Mexico's water scarcity and urbanization projects offer similar opportunities. Meanwhile, Africa, though less detailed in the data, presents a long-term growth story. The Netherlands' expertise in integrated water solutions—linking energy, agriculture, and IT—positions it to address Africa's infrastructure gaps.

Resilient Sectors: Agriculture, Biotech, and Green Innovation

While high-risk sectors grapple with tariffs, others are thriving. Dutch agribusinesses like Royal FrieslandCampina and Nutreco are expanding into Asia and Africa, reducing U.S. dependency. The logistics advantage of Rotterdam and Schiphol ensures these exports remain competitive.

Biotech, however, remains politically volatile. The collapse of the Schoof I government in June 2025 left €1.3 billion in biotech funding in limbo, stalling projects like Crop-XR. Yet, the autumn 2025 elections could bring a pro-science coalition, reviving innovation in animal-free research and regenerative medicine. Royal DSM and Theradome are names to watch if funding resumes.

Policy Catalysts and Investment Strategy

Three policy-related events could reshape the Dutch economic landscape:
1. U.S.-EU Trade Deal Resolution: A rollback of tariffs by late 2025 could boost equities in steel, machinery, and agriculture.
2. Dutch Elections: A pro-innovation government could unlock biotech funding, benefiting firms like DSM.
3. CBAM Expansion: Regulatory tailwinds for green tech firms are likely as the EU tightens carbon rules.

For investors, the playbook is clear. Buy sector-specific plays in green steel (ArcelorMittal), diversified agribusiness (Nutreco), and biotech (DSM). Hold broader ETFs like the iShares MSCI Netherlands ETF (EWN) until trade negotiations clarify. Avoid cyclical sectors tied to U.S. tariffs, such as automotive parts, until policy clarity emerges.

Conclusion: Navigating Uncertainty with Precision

The Dutch economy's vulnerability to trade tensions is undeniable, but its agility and innovation offer a path forward. By focusing on green steel, diversified agriculture, and biotech, investors can hedge against near-term risks while positioning for long-term growth. The key lies in timing—monitoring trade negotiations, CBAM developments, and election outcomes will be critical. For now, the Netherlands' openness to global markets remains both its greatest risk and its most potent asset.