Beyond tariffs: CEOs grapple with a sinking US market – Lionel Laurent

Key topics:.US tariffs chill corporate investments and mergersEurope seeks economic independence amid uncertaintyBoardrooms brace for Trump-era market unpredictability.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Lionel Laurent___STEADY_PAYWALL___.The day after Donald Trump's election victory, I listened over breakfast to a European chief executive's prediction of the boom that would follow: More deals and more investment would head to the US in anticipation of more growth; the Old Continent, stuck in a productivity and demographic tailspin, would struggle to close the gap..Ten weeks into Trump's second term, with trade-war fears surging as the US imposes tariffs on trading partners around the world, that memory feels like a parallel universe. Corporate America is hoarding cash, not splurging it. The dollar has fallen against major currencies, and the S&P 500 is down 4% and headed lower as of Wednesday night. And despite some banner investment pledges from billionaire Rodolphe Saade and carmaker Hyundai Motor Co., there's been an estimated year-on-year decline of between 7%-14% in merger volumes in the US, which accounts for almost half of all transactions globally. Europe and Asia, meanwhile, have seen theirs grow..It would be naïve to imagine that animal spirits will snap back now that Trump has finally lifted the veil on tariffs of 20% on the European Union, 24% on Japan and 34% on China. Bankers and executives say the ideology accompanying the smashing of trade ties, not just its quantum, is what makes the US a chillier market. They cite the attacks on rule of law, including executive orders targeting major legal firms; a long list of US grievances on trade from value-added tax to tech regulation that point to longer-term tensions; the crackdown on immigration sweeping up tourists and McCarthyist demands to bend the knee on diversity, equality and inclusiveness (DEI) beyond US soil..Read more: Eggs-ellent victory: Trump's tariffs smash Canadian smuggling.Tariffs are just the tip of the iceberg threatening the $2 trillion EU-US trading relationship, in other words. With JD Vance threatening Greenland, Elon Musk supporting the German far right and Trump pausing enforcement of anti-bribery laws to help US "competitiveness," some European executives are asking themselves if they can work with bulge-bracket Wall Street firms in the current climate. Leonardo SpA's replacement of adviser Bank of America Corp. with Deutsche Bank AG is only a taste of what might come as relationships get reviewed. Contract disputes will get tougher as cost inflation trickles through and as America First preferences become explicit. Trust in the US is fading..To be clear: This is not capitalism developing a conscience. Diversity was never exactly a strong suit for European companies; nor can businesses really afford to drop the US economy as one might ditch a Tesla. The global scramble to persuade Trump to cut tariffs will be brutal and crowded..Yet boardrooms can't wish away a hostile and unpredictable environment that mixes mercantilism and MAGA — or McKinley and McCarthy. The focus now should be on finding defensive responses to economic pressure that go beyond the old playbook of manufacturing more in the US or passing on the cost of tariffs, which are starting to look inadequate given the threat of economic stagflation and the unpredictability of Trump. Tech will be a flashpoint, as suggested by officials working on protective measures in Brussels; if Europe has leverage, it's in the fact that it imports a lot of US services. S&P 500 firms derive about 30% of revenue from outside the US. .And if an unreliable US is the new normal, Europe's corporate and political leaders also have to develop a strategy in a world where few of the old certainties remain — China's export markets, cheap Russian energy and US security guarantees are falling away piece by piece. It is high time that Europe focus on building up its strengths as a single market of 440 million people with trillions in savings. It needs to work out who its geopolitical friends are, as well as bolster the euro as a true alternative to the US dollar and focus on domestic growth to become less reliant on trade. With so many European industries in the firing line right now, what's needed is a true top-down strategy of economic deterrence, as laid out in a recent paper by ex-French government adviser Shahin Vallee..This will be easier said than done. Predictions of a US-led Trump boom have been wrong so far. But Europe's track record of fragmenting and squabbling when the occasion calls for unity means that it's too early to know whether it can buck its own well-worn trend..Read also:.Trump's tariffs and energy orders: What they mean for SA's economy – Kevin Lings🔒 Trump's boldest speech yet: Tariffs, taxes, and tumult – and the truth behind his claims🔒 Trump's third-term talk: A joke, a distraction, or a real threat?.© 2025 Bloomberg L.P.

Beyond tariffs: CEOs grapple with a sinking US market – Lionel Laurent

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