Tariffs and Turmoil: How U.S. Policies Are Upending European Far-Right Power Structures

Eli GrantFriday, Apr 25, 2025 8:43 am ET
36min read

The Trump-era tariffs, once a tool of American economic might, have now become a political liability for European far-right leaders, most notably Hungary’s Viktor Orbán. With the economic squeeze intensifying, these leaders find themselves caught between loyalty to Donald Trump and the escalating demands of their constituents. The consequences are reshaping political landscapes and could have lasting implications for investment strategies in Europe.

Hungary’s Economic Vulnerabilities

Hungary’s economic vulnerabilities have been laid bare by the tariffs. The central bank warns that GDP growth could be reduced by 0.5 to 0.6 percentage points, a stark contrast to the economic stability Orbán once touted as proof of his leadership. Inflation, which spiked above 25% in early 2023 before settling at 5.6% in February 2024, has forced the government to impose food price controls—a move that has done little to stem public discontent. .

The auto industry, a key sector accounting for 25% of Hungary’s manufacturing output, faces direct pressure from U.S. tariffs on steel and aluminum. Companies like Suzuki and Suzuki-Panthera, which rely on North American supply chains, now confront higher production costs. Orbán’s efforts to negotiate a bilateral economic deal with the U.S. remain stalled, leaving Hungary exposed.

Far-Right Divisions Across Europe

The political fallout extends beyond Hungary. European far-right leaders are navigating a treacherous path between Trump’s protectionism and domestic economic realities. In Spain, Vox’s Santiago Abascal has shifted blame to the EU and Spain’s center-left government for failing to secure tariff exemptions. Germany’s Alternative für Deutschland (AfD) is splintered: one co-leader calls tariffs “understandable,” while the other advocates for U.S.-EU dialogue. Even Britain’s Reform UK leader, Nigel Farage, now criticizes the tariffs as reckless, likening them to the policies of Liz Truss—a stark reversal for a lifelong Trump ally.

Italy’s Giorgia Meloni faces a dual crisis: meeting Trump’s demand for 5% GDP defense spending (up from 1.5%) while avoiding tariffs that could cost €7 billion annually. .

The EU’s Unified Response

Meanwhile, the European Union’s unified response has bolstered its standing. Public support for the EU has hit a 42-year high of 74%, a stark contrast to the far-right’s declining influence.

. Brussels is preparing retaliatory tariffs, diversifying trade ties with India and Central Asia, and considering its “anti-coercion instrument” to restrict U.S. market access—a move that could disrupt sectors like automotive and agriculture.

The EU’s transactional pragmatism is clear: it has increased U.S. gas imports to counter Russian influence while pushing for greater autonomy in trade. This shift has strengthened the eurozone’s economic resilience, with the MSCI Europe Index outperforming the S&P 500 by 12% year-to-date.

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Investment Implications

Investors must balance political risk with economic fundamentals. Sectors tied to far-right leaders—such as energy or construction projects in Hungary—are now high-risk bets. Meanwhile, industries aligned with EU unity, such as renewable energy and tech, could thrive.

  • Auto Manufacturing: Avoid Hungarian auto stocks like Suzuki-Panthera; instead, look to German firms like Daimler (DAI.DE) or French peers like Stellantis (STLA.MI) that may benefit from EU-U.S. trade diversification.
  • Energy and Infrastructure: The EU’s push for energy independence favors companies like NextEra Energy (NEE) or Siemens Gamesa (Gamesa.MC).
  • Financials: Banks exposed to political instability, such as OTP Bank (OTP.BU), face elevated risks.

Conclusion

The political fallout from Trump’s tariffs is creating both risks and opportunities. With far-right leaders under pressure, investors should prioritize stability over ideology. The EU’s strengthened unity and economic resilience suggest that sectors aligned with European cohesion—such as renewable energy and technology—may outperform. However, volatility remains high: Orbán’s Fidesz faces a “significant chance” of electoral defeat, per analysts, while the EU’s retaliatory measures could trigger a trade war with the U.S.

Key data underscores the stakes: Hungary’s GDP growth is projected to fall by 0.6 percentage points, Italy’s tariffs could drain €7 billion annually, and EU public support is at a record high. For investors, the message is clear: bet on institutions, not ideologies, as the continent recalibrates its economic and political future.