Which European companies are more vulnerable to U.S. customs duties?

A new analysis conducted by Goldman Sachs, led by equity strategist Peter Oppenheimer, highlights the increasing risks for European firms. According to the report, European companies currently hold about 30% of their assets in the U.S.

Following three tumultuous global market sell-off days triggered by the latest wave of U.S. tariffs, investors are trying to determine which European companies are at greater risk and which may be more resilient. U.S. President Donald Trump ignited the latest wave of volatility by imposing significant tariff increases on all major trading partners, including a 34% tariff on goods imported from China and a 20% tariff on selected European goods. This move weighed heavily on stock prices and corporate profit forecasts, intensifying fears of a renewed global trade war. Goldman Sachs' new analysis emphasizes the increasing risks for European firms. According to the report, European companies currently hold about 30% of their assets in the U.S. This figure is significantly higher than the sub-20% recorded in 2013. The report states, "North America is the largest single market for European companies in terms of sales, and it is larger than the combined sales from the UK, Germany, and China." Companies listed in the Euro STOXX 600 index derive an average of 26% of their revenues from North America. However, exposure levels vary significantly between sectors. While some sectors are deeply intertwined with the U.S. market, others are largely insulated from the current trade turbulence.

Which European companies are facing the biggest risks? Some European companies that are heavily dependent on U.S. sales are currently facing a double threat: tariffs impacting their products and a weakening dollar that erodes their profits when converted to euros. Among those at the highest risk is Dutch supermarket giant Ahold Delhaize, which derives more than 60% of its revenue from chains like Stop & Shop and Food Lion. British equipment rental provider Ashtead Group, which obtains more than 70% of its revenue from its U.S. subsidiary Sunbelt Rentals, is also in danger. Following these are German Fresenius Medical Care, a major dialysis and healthcare provider heavily established in the U.S. market, and distribution firm Bunzl, which is significantly reliant on North American sales. Other firms facing significant challenges include catering giant Compass Group, credit institution Experian, education publisher Pearson, business analytics leader RELX Plc, hotel operator InterContinental Hotels Group, pest control specialist Rentokil Initial, and technology and industrial firm Smiths Group. Pharmaceutical giants like Denmark's Novo Nordisk, Switzerland's Roche, and France's Sanofi have significant sales percentages in the U.S. However, they have so far been exempt from the tariff regime. Oppenheimer noted, "Our economists currently see a 45% chance of the U.S. entering a recession, and this likelihood increases if all trade tariffs are enforced." According to Goldman Sachs, companies in the media and healthcare sectors are the most 'exposed' to the U.S. and therefore may suffer from slower economic growth: "On the other end of the spectrum, the real estate sector should benefit from low international risk."

Domestically-focused European companies may provide better protection against tariffs. European firms with predominantly domestic operations may navigate the tariff storm more easily. While a global economic downturn and reduced disposable incomes could harm domestic sales, these firms are relatively insulated compared to those heavily reliant on U.S. exports. These companies typically operate in regulated sectors such as utilities, telecommunications, and national financial services or local real estate. For example, Spanish utility companies Endesa and Redeia primarily operate within Spain and are isolated from external shocks. Italy's financial institutions Intesa Sanpaolo and Nexi are largely dependent on their local markets and continue to benefit from stable domestic demand. French real estate giants Covivio and Klepierre have extensive real estate portfolios in France and neighboring countries. This company also enjoys stable revenues that are relatively unaffected by U.S. tariffs. Similarly, German real estate groups LEG Immobilien and Vonovia manage extensive residential real estate portfolios primarily serving German tenants, protecting them from international trade disputes. Italy-based hearing aid provider Amplifon, leading Spanish bank CaixaBank, Europe-wide telecom infrastructure operator Cellnex Telecom, and Telecom Italia limit their exposure to fluctuations in the U.S. market by maintaining strong local or Europe-centered operations. Analysts stated, "Germany's need to gain greater financial momentum and invest more in domestic industries to reduce reliance on the U.S. should motivate plans to restore cash flow to Europe in the long term."

A triple threat for European investors. European investors have also significantly increased their interest in U.S. stocks. These investors currently hold about 50% of their equity investments in the American market. While this distribution has historically boosted returns during periods of stagnant growth in Europe, Goldman Sachs analysts are now highlighting a triple threat: rising tariff risks, weakening U.S. economic growth, and a depreciating U.S. dollar. Goldman Sachs predicts that over the next year, the euro will strengthen to 1.20 against the dollar, while the British pound will rise to 1.39. Such currency fluctuations will further increase the distress for European investors by reducing the euro value of profits earned in the U.S. Europe's earnings outlook is increasingly deteriorating. Reflecting these concerns, Goldman Sachs has significantly lowered its earnings forecast for European companies, projecting a 7% decline in earnings per share for 2025 and a markedly lower, flat growth for 2026 than previously anticipated. "There are downside risks," Oppenheimer said, noting that historical data paints a grim picture. "During recessionary periods, earnings in Europe typically decline by an average of 20%, and in cyclical sectors, this drop can reach 30% to 40%."