Navigating EU-US Trade Tensions: Sectors and Companies Poised to Win

The escalating trade war between the EU and the U.S. has cast a shadow over industries reliant on transatlantic trade. Yet, within the chaos of tariffs and countermeasures, opportunities abound for investors to capitalize on strategic sectors like automotive, aerospace, and medical technology. Companies with robust R&D pipelines, geographic diversification, or exposure to tariff-exempt areas stand to thrive as trade barriers force supply chain reshaping. Here's how to position your portfolio for growth.

Automotive: Localize or Perish

The automotive sector is ground zero for trade friction, with the U.S. imposing 25% tariffs on EU-made vehicles and threatening higher levies on copper—a critical component—while the EU retaliates with tariffs on $72 billion of U.S. goods. The result? A push toward localization.

European automakers like Volkswagen, BMW, and Mercedes-Benz are already mitigating risks by expanding U.S. manufacturing. For instance, BMW's Spartanburg plant supplies SUVs to the U.S., shielding it from tariffs. Similarly, Stellantis (owner of Peugeot and Chrysler) has doubled down on North American production.

Investment Play: Look to automakers with U.S. production capacity. Consider sector ETFs like the iShares Global Automotive ETF (CAR), which includes European manufacturers.

Aerospace: R&D and Resilience

The aerospace rivalry between Boeing (U.S.) and Airbus (EU) has intensified as tariffs loom. The U.S. could reimpose 10–50% duties on EU-made aircraft by July 9, while the EU threatens retaliatory tariffs on Boeing.

The key to survival here is R&D dominance. Airbus has invested in localized supply chains, reducing reliance on U.S. parts, while Boeing's military contracts (e.g., F-15X jets) offer a tariff-proof buffer. Investors should prioritize firms with strong order backlogs and defense ties.

Investment Play: Focus on Airbus and companies with military exposure. Consider the Global Jets ETF (JETS) for broader sector exposure.

Medical Technology: The Untouchables

Medical tech has emerged as a relative safe haven. While the EU initially considered tariffs on over 800 medical trade codes, industry lobbying (led by MedTech Europe) pushed for exemptions. The EU's “Zero for Zero” proposal to eliminate mutual tariffs by July 9 could further stabilize this sector.

Companies like Siemens Healthineers (medical imaging and diagnostics) and Philips (patient monitors, MRI systems) thrive due to their global supply chains and essential product lines. Their diversified manufacturing (e.g., U.S., EU, Asia) insulates them from trade shocks.

Investment Play: Prioritize firms with global supply chains and critical care products. The iShares U.S. Medical Devices ETF (IHI) offers exposure to both EU and U.S. leaders.

The Smart Move: Diversify and Hedge

Investors should reallocate capital to:
1. Tariff-Exempt Sectors: Semiconductors (e.g., ASML, a Dutch chip equipment giant) are shielded from tariffs due to their critical role in defense and tech.
2. Geographic Diversification: Firms like Renault (with U.S. partnerships) or Fresenius Medical Care (global dialysis networks) avoid overexposure to any single region.
3. R&D Powerhouses: Companies like Roche (pharma and diagnostics) and Thales (aerospace tech) dominate innovation, reducing reliance on trade-sensitive inputs.

Conclusion: Trade Barriers, Strategic Gains

The EU-U.S. trade war is a test of corporate agility. Sectors like automotive, aerospace, and medical tech offer fertile ground for investors who focus on localization, R&D, and diversification. As deadlines like July 9 approach, companies that weather tariffs will emerge stronger, while ETFs like CAR, JETS, and IHI provide scalable exposure. The message is clear: invest in resilience, and profit from the chaos.

Stay ahead of the tariffs—invest in the survivors.