Quick View: US-EU trade deal removes a major overhang for European stocks
European equity portfolio managers Robert Schramm-Fuchs, Tom Lemaigre and Marc Schartz share the key messages from the US-EU trade deal, which should spark renewed optimism in European markets.
2 minute read
Key takeaways:
- The US and European Union (EU) have struck a better-than-feared trade deal ahead of the 1 August deadline, agreeing a 15% baseline tariff for most EU goods sold to the US, with pledges for investment into the US and purchases in US energy and military equipment.
- The deal removes a major overhang for Europe, allowing investors to focus on the key drivers that are shaping the region.
- The team has reallocated to sectors that are at the cheaper, more cyclical and more value-end of the spectrum.
As anticipated, the US-EU trade deal has landed ahead of the 1 August deadline, averting what could have been an escalation in transatlantic trade tensions. The final framework agreement sets a 15% baseline tariff on most EU goods entering the US, lower than the feared 30% fallback rate and well below the 50% threat floated earlier this year. This outcome is broadly better-than-feared.
The 15% baseline tariff includes automobiles, pharmaceuticals and semiconductors – important products for Brussels. Steel and aluminium tariffs remain at 50% for now. Certain sectors were spared; aircraft and components, while select chemicals and key agricultural materials will face zero-for-zero tariffs. Also part of the deal are pledges for the EU to purchase US$750 billion in US energy; investment of US$600 billion in the US; and “vast amounts” of military equipment.
While some details remain vague, the deal signals a clear intent to rebalance trade while maintaining strategic alignment. Market reaction to the deal this morning has so far been positive, with recent rotation themes remaining intact. The deal removes a major overhang, allowing investors to refocus on the broader set of structural and cyclical drivers shaping the outlook for Europe. Notably, this includes the growing momentum behind EU-wide initiatives aimed at easing financial regulation, advancing capital markets and reducing bureaucratic friction.
It’s often in these market phases that leadership of stocks and sectors changes. We have reallocated to sectors that are at the cheaper, more cyclical and more value-end of the spectrum. Stocks priced for perma-recession or long-term poor sector prospects tend to experience the greatest change: from being ‘left for dead’ to ‘still alive and kicking’. Moreover, market breadth typically widens, i.e. instead of a narrow leadership group, many stocks would participate in a broad-based bull market.
Cyclical stocks: stocks whose prices are affected by macroeconomic or systematic changes in the overall economy. Among these are companies that sell discretionary consumer items eg. cars and travel, as well as miners, which are closely tied to the health of the global economy.
Bull market: occurs in a period where the prices of securities are generally rising, and is associated with economic growth and positive investor sentiment.
Germany stimulus package: in March 2025 an EUR 500 billion financial package was approved by a two-thirds majority in the Bundestag, aiming to help resolve the backlog in public investment and stimulate private sector activity.
Perma-recession: refers to a prolonged period of economic stagnation or decline, often characterised by slow growth, high unemployment, and persistent economic challenges, with no clear end in sight.
Tariffs: a tax or duty imposed by a government on goods imported from other countries.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
There is no guarantee that past trends will continue, or forecasts will be realised.
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Specific risks
- Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
- The Fund may use derivatives to help achieve its investment objective. This can result in leverage (higher levels of debt), which can magnify an investment outcome. Gains or losses to the Fund may therefore be greater than the cost of the derivative. Derivatives also introduce other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
- If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
- When the Fund, or a share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency (hedge), the hedging strategy itself may positively or negatively impact the value of the Fund due to differences in short-term interest rates between the currencies.
- Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
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- The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Specific risks
- Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
- If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
- The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
- If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
- When the Fund, or a share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency (hedge), the hedging strategy itself may positively or negatively impact the value of the Fund due to differences in short-term interest rates between the currencies.
- Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
- The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Specific risks
2 minute read
Key takeaways:
- The US and European Union (EU) have struck a better-than-feared trade deal ahead of the 1 August deadline, agreeing a 15% baseline tariff for most EU goods sold to the US, with pledges for investment into the US and purchases in US energy and military equipment.
- The deal removes a major overhang for Europe, allowing investors to focus on the key drivers that are shaping the region.
- The team has reallocated to sectors that are at the cheaper, more cyclical and more value-end of the spectrum.