US Tariffs Drive Sharper Decline in European Corporate Earnings

Europe’s corporate earnings season has unveiled a discernible shift in economic sentiment, with U.S. import tariffs now demonstrably impacting the financial performance of major European enterprises. Initial analyst expectations for a modest 0.2% dip in profits for companies on the Stoxx Europe 600 index have been recalibrated to a 0.7% year-over-year decline, according to LSEG data. This downward revision underscores how a growing number of European industrial and consumer giants are contending with tariffs that are curtailing sales, escalating operational costs, and dampening the broader investment climate.

• European corporate profit forecasts for the Stoxx Europe 600 index have been revised downward to a 0.7% year-over-year decline, from an initial 0.2% dip, largely due to U.S. tariffs.
• U.S. import tariffs, introduced in April 2025, are directly influencing the financial performance of major European industrial and consumer enterprises.
• The automotive sector is particularly affected, with Jaguar Land Rover reporting a 15.1% plunge in retail sales and Volvo Group scaling back North American operations due to tariff-related uncertainty.
• Beyond manufacturing, tariff-induced uncertainty is delaying capital expenditure, impacting order intake for companies like Tomra Systems and causing clients in ABB’s robotics division to adopt a “wait-and-see mode.”
• Consumer goods producers such as Essity and Barry Callebaut, along with financial institutions like Nordea Bank and Investor AB’s subsidiary Molnlycke, have also reported negative impacts from tariffs.
• Despite the widespread challenges, some companies, including industrial group Sandvik and pharmaceutical giant Novartis, have demonstrated resilience or implemented strategies to mitigate tariff impacts.

Sectoral Headwinds and Corporate Responses

The manufacturing sector, particularly automotive, finds itself at the forefront of these trade conflicts. Jaguar Land Rover, owned by India’s Tata Motors, reported a 15.1% plunge in retail sales for the quarter ending June 30, directly attributing the slump to U.S. import tariffs introduced in April 2025. Similarly, Sweden’s Volvo Group is scaling back North American operations due to weak demand influenced by “uncertainty surrounding both tariffs and the [Environmental Protection Agency] 2027 emissions regulations,” leading to production capacity reductions, as stated by CEO Martin Lundstedt.

Beyond the automotive industry, tariff-induced uncertainty is also delaying capital expenditure across various sectors. Norway’s Tomra Systems, a recycling machinery producer, noted that its order intake was impacted by “macroeconomic and tariff uncertainty which is postponing customers’ investment decisions.” Switzerland’s industrial conglomerate ABB observed that clients in its robotics division entered a “wait-and-see mode” due to tariff uncertainties, consequently delaying projects. Despite these challenges, ABB notably reported record second-quarter orders across its diverse group.

The ripple effect of tariffs extends to consumer goods and the financial sector. Consumer-goods producer Essity, for instance, raised prices primarily to offset “increased costs of goods sold, including trade tariffs.” Barry Callebaut, the world’s largest chocolate maker, experienced a 9.5% third-quarter volume drop, partly due to “particular tariff-related uncertainty in North America,” which led the company to revise its full-year guidance downwards. Even financial institutions are not entirely immune; Nordea Bank reported its market-making business was “impacted by volatility due to tariff uncertainty,” while Investor AB noted a “smaller negative impact from tariffs” on its medical-device subsidiary Molnlycke’s profit margins.

Strategies for Mitigation and Resilience

Despite the widespread impact, some companies are demonstrating resilience and effective mitigation strategies. Industrial group Sandvik reported a “swift response to tariffs, fully offset in the quarter.” Swiss pharmaceutical giant Novartis also anticipates no financial impact from tariffs this year. CEO Vasant Narasimhan cited “adequate inventory in the U.S. for this year” and outlined a long-term strategy to “produce all our medicines for the U.S. in the U.S. and fully mitigate tariffs” over the coming years. These diverse corporate responses highlight various approaches to navigating evolving trade policies.