Navigating the New U.S.-EU Trade Landscape: Opportunities in UK and European Equities

The U.S.-EU trade agreement of July 2025 has reshaped the geopolitical and economic landscape, creating both challenges and opportunities for investors in UK and European equities. With a 15% tariff on most EU goods to the U.S. and a $750 billion energy import commitment, the deal has recalibrated global supply chains and sectoral dynamics. For investors, this is a pivotal moment to identify resilient companies and sectors poised to thrive in this new environment.

Energy: The New Strategic Pillar

The energy sector stands as the most obvious beneficiary. The EU's pledge to purchase U.S. liquefied natural gas (LNG), oil, and nuclear fuel over three years has accelerated infrastructure development on both sides of the Atlantic. European firms like TotalEnergies (FR:TOT) and Siemens Energy (DE:ENR) are central to this transition. TotalEnergies is expanding its LNG terminal operations and green hydrogen projects, while Siemens Energy is securing U.S. contracts under the EU's $600 billion investment plan.

UK energy equities, such as BP (UK:BP) and Iberdrola UK, are also gaining traction. BP's U.S. shale partnerships and Iberdrola's offshore wind projects align with the growing demand for energy security. The valuation gap between European and U.S. energy stocks—European firms trade at 9x P/E vs. 15x for U.S. peers—offers compelling entry points.

Automotive: Winners and Losers in a Tariff-Driven World

The 15% tariff on EU automotive exports to the U.S. has disproportionately impacted German automakers. Volkswagen, BMW, and Mercedes-Benz face billions in annual losses, while U.S. automakers benefit from a reduced EU tariff on their cars (2.5% vs. 10%). However, the automotive supply chain is evolving. Companies like Valeo (FR:ALO) and ZF Friedrichshafen (DE:ZF) are adapting by pivoting to electric vehicle (EV) components and reshoring production.

For UK investors, the lower U.S. tariff on UK car exports (10% vs. 15% for EU) creates a competitive edge. Firms like Aston Martin (UK:AMH) and Renault UK could capitalize on this differential.

Pharmaceuticals: Reshoring and Regulatory Gains

The U.S. threat of a 200% tariff on European drugs has accelerated reshoring by firms like Roche (SW:ROG) and Novartis (SW:NOV). These companies are building U.S. manufacturing hubs while lobbying for tariff exemptions. The EU's 2023–2025 Pharma Package, which streamlines drug approvals and extends data protection, further enhances the sector's appeal. Niche players like Spark Therapeutics (a gene therapy leader) are well-positioned to outperform.

UK's Strategic Positioning: Bridging the Atlantic

The UK's post-Brexit trade agreements have created a unique “sweet spot.” Its U.S. deal allows for 10% tariffs on cars and low tariffs on steel, while its “reset” EU agreement eases post-Brexit trade barriers. This dual access positions the UK as a manufacturing and investment hub.

Energy firms like Centrica (UK:CNA) and SSE (UK:SSE) are expanding LNG infrastructure, while tech companies such as ARM Holdings (UK:ARM) benefit from U.S. semiconductor investments. The UK's financial sector, with its flexible regulatory framework, remains resilient despite some post-Brexit relocations.

Regional Opportunities: Central, Nordic, and Southern Europe

• Central Europe: MOL Group (HU:MOL) and PKN Orlen (PL:ORN) are expanding LNG terminals in Hungary and Poland.
• Nordic Europe: Vestas (DK:VWS) and Northvolt (SE:NVLT) are securing U.S. green energy contracts.
• Southern Europe: Ferrari (IT:FAR) and Iveco (IT:IVE) are pivoting to high-margin EV components.

Strategic Investment Thesis

1. Energy Infrastructure: Target firms with exposure to LNG terminals, grid modernization, and green hydrogen.
2. Pharmaceuticals: Focus on companies leveraging EU regulatory reforms and reshoring trends.
3. UK Equities: Prioritize energy, technology, and financials with dual U.S.-EU access.

Conclusion: Navigating the New Normal

The U.S.-EU trade agreement is not just a geopolitical milestone but a structural opportunity. While tariffs and regulatory shifts pose challenges, they also create openings for companies and sectors that adapt. Investors who identify underappreciated European equities—particularly in energy, pharmaceuticals, and UK-based firms—can unlock significant alpha in the coming years. The key is to balance sectoral resilience with strategic regional positioning, ensuring a diversified portfolio ready for the next phase of global trade dynamics.