Tariff Troubles Await! Will These European Giants Survive Trump's Trade Storm?

A World On Edge: The Tariff Tempest

Ah yes another year another twist in the intricate dance of global economics. As we venture into the first quarter earnings season of 2025 a rather large cloud hangs heavy over the heads of investors. And what you may ask has stirred up this meteorological maelstrom? None other than the tariffs imposed by U.S. President Donald Trump. These duties like a sudden squall have exceeded even the most pessimistic forecasts leaving the markets in a state of rather understandable discombobulation. It's a bit like watching a flock of flamingos trying to navigate a particularly gusty hurricane isn't it? One can only imagine what the flamingoes are thinking! "Never say goodbye because goodbye means going away and going away means forgetting."

The Negotiating Tango: Europe Tries to Keep Up

Negotiators from the European Union and the U.K. like seasoned diplomats attempting to mediate a particularly heated dispute between chimpanzees are in talks with U.S. officials. Their mission? To try and mitigate the impact of those rather hefty blanket tariffs of 25% and 10% respectively. Meanwhile the whole world watches holding its collective breath to see if the simmering tensions between Washington and Beijing will cool. If not we could be looking at a full blown trade war between the two biggest economies which as you can imagine would have repercussions that would spread like a rather unwelcome invasive species across the globe.

Luxury Woes and Chip Concerns: Early Warning Signs

Two major earnings reports have already surfaced from Europe offering a tantalizing glimpse into what's to come. LVMH the luxury behemoth has expressed concerns that their beauty wines and spirits divisions could suffer from a decline in spending by as they put it 'aspirational clientele.' One can only imagine the horror! Meanwhile Dutch semiconductor firm ASML the makers of chipmaking machines vital to global tech lamented that tariffs are 'creating a new uncertainty' around demand. A bit like trying to build a beaver dam with all the wrong sized sticks. Frustrating to say the least! And yet neither company was able to quantify the scale of the potential impact. A bit like trying to predict the migratory patterns of the Arctic tern. Challenging!

Maersk's Maritime Mayhem: Riding the Waves of Uncertainty

First up is Maersk the Danish shipping giant a true bellwether for global trade. Their first quarter earnings due on May 8 are eagerly awaited. The company's shares have been about as stable as a penguin on an ice floe in recent weeks reacting wildly to the Trump administration's tariff announcements. An escalating trade war between the U.S. and China the world's two biggest economies is causing considerable consternation in the maritime and transport sector. Analysts expect Maersk's EBITDA to dip from $3.6 billion in the final quarter of 2024 to $2.3 billion. A rather significant drop wouldn't you say? Maersk themselves have described the U.S. tariffs as 'significant' and 'clearly not good news for the global economy stability and trade.' High praise indeed! 'An understanding of the natural world and what's in it is a source of not only great curiosity but great fulfillment.'

Shell's Shifting Sands: Oil Amidst the Turmoil

Next in line is Shell scheduled to report on May 2. The British oil giant in March announced plans to boost shareholder returns cut costs and double down on liquefied natural gas (LNG). However they've also trimmed their first quarter LNG production outlook citing unplanned maintenance including in Australia. Oil and gas stocks have been caught up in the tariff fueled market turmoil with growing recession fears subdued oil demand and falling crude prices adding to the drama. Analysts at Hargreaves Lansdown note that Shell's 'sharpened focus on efficiency and quality leaves it well placed to grow free cash flow and shareholder distributions.' But as they rightly point out Shell can't control the oil price. As such investors must be prepared for a rather 'high level of volatility.' Shell is expected to report adjusted earnings of $5.14 billion down from $7.73 billion a year ago. A bit like a chameleon changing colors in a particularly unpredictable environment.

Volkswagen's American Dream: Tariffs Hit the Autobahn

And finally Volkswagen the German automotive giant is bracing for impact from tariffs particularly those on Canada and Mexico. The U.S. has implemented a 25% charge on all foreign cars imported into the country which appears to have caused some panic buying. Volkswagen's CFO has stated that the company already feels 'like an American company' due to its thousands of U.S. employees. However analysts warn that tariffs are particularly negative for German carmakers who export thousands of vehicles a year to the U.S. while many cars produced in the country still require European made parts. Volkswagen is expected to produce higher year on year revenue in the first quarter but earnings before interest and taxes are seen dipping. As I always say look after this planet it's the only one we have.