EU stocks outpace Wall Street since Trump took office

European stocks have done better than US stocks under Trump’s administration. The main Stoxx Europe 600 index has gone up 5.6%, while on  Wall Street, the S&P 500 has gone up 2.5%, and the tech-heavy Nasdaq Composite has gone up 2.2%.

According to analysts, this great performance is a result of Trump’s decision not to put tariffs on the EU right away. In addition, there are hopes for peace talks in Ukraine.

According to Bank of America, European stocks are off to the best start to a year since the late 1980s. They are also doing the best compared to the US in almost ten years.

This was unexpected because Trump’s election was the most recent event that caused European stocks to fall behind US stocks by the largest spread ever. In fact,  investors feared a brutal trade war. In recent years, Wall Street has been helped by a big rise in Big Tech stocks.

Trump has threatened the EU nations with tariffs because of their unfairness to the US. Therefore, the group was expected to be a big target of his “America First” policies. However, no tariffs have been put in place yet. To that end, Europe has vowed to retaliate if Trump imposes tariffs on the bloc.

Some experts are unsure if Europe’s performance will last the whole year. This could be the case, especially if US tariffs are only delayed instead of lowered.

UBS analysts said, “The muscle memory for most investors is that European outperformance can be only by small amounts for very short periods.”

What role does Europe play in this surge?

Since the beginning of the year, European fund managers have increased their allocations, which has helped the rally. This week, a poll showed that the percentage of people who thought the region’s stocks were undervalued was at its highest level in six years.

The lack of day-one tariffs has caused stocks in sectors like finance, defense, and luxury goods to rise. This is boosted by the hope that European countries will spend more

Rheinmetall, which makes the most ammo in Europe, is up 34% in the last month, while Richemont, which makes high-end goods, is up 11%.

The dollar has lost 1.6% of its value against the euro in the last month.

UBS analysts raised their allocation to mainland Europe to overweight. They did this because they saw lower energy prices as a benefit of ending Russia’s invasion of Ukraine, looser fiscal policy, and higher corporate earnings.

Hong Kong takes the lead. It has had the best-performing major index, the Hang Seng index, which has gone up 15% since January 20. This lead was influenced by a rise in Chinese tech stocks traded in Hong Kong after the DeepSeek shock.

Trump’s tariffs are doing more harm than good. The US markets have crashed dramatically since Trump got into power. However, Trump’s administration is still banking on a better future.

The trade between the EU and the US – What is the tariff impact? 

In 2024, the United States bought goods from European Union member states worth about $600 billion. According to data from the U.S. Trade Census pharmaceutical goods were the most important thing the U.S. bought from the EU in 2024. 

President Trump is considering imposing tariffs on many different types of goods from partners, not just metals. This would be the latest “reciprocal” trade war move by the U.S. government, and some types of goods would be hit much harder than others.

To that end, the drug and medical business as a whole will be one of the sectors most affected by tariffs. Imports of surgical and medical tools were worth $37 billion, and medical devices, such as CRT machines, respirators, orthopedic devices, and surgical equipment, were worth $22 billion. 

Another top product in 2024 was hearing aids, which brought in $1.3 billion, and artificial joints, which brought in $2.5 billion.

In addition, the White House said that trade and tax rules between the U.S. and EU were unfair for shellfish and cars. Trump said, “They don’t take our cars, they don’t take our farm products, they take almost nothing, and we take everything from them. Millions of cars, tremendous amounts of food and farm products.” In fact,  20 EU member states exported more to the US than they imported in 2023.

Trump chose Jamieson Greer to be the US trade representative. Greer is a true economic nationalist who thinks tariffs are the only way to bring production back to the US. 

He is especially interested in the trade imbalance between the US and Europe in agriculture and cars. Greer will try to fix this by putting pressure on the EU to lower its tariffs and get rid of other barriers that aren’t duties. 

What can the EU do? Greer will expect the EU to agree with the US on China when it comes to controls on technology and exports, screening of investments coming in and going out, and making sure the supply chain is strong. Europe could get him to change his mind about tariffs on EU exports by showing that he is willing to work with them on some of these issues.

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