Disaster or opportunity? European VC investors weigh in on Trump's tariffs

Donald Trump made it very clear that all major companies in nearly every country will be affected by his new tariffs – which will include 20 percent on all European goods.

The impact on the European startup scene could be even greater, some leading VC investors tell Impact Loop.

"Startups are even more vulnerable than the big corporates, in the sense that if you rely on imports that become more expensive and you have to reorganise your supply chains because of that, then obviously cash is king," Steffen Wagner, co-founder and co-CEO of the European deeptech investor Verve Ventures, tells Impact Loop.

"And we’re already in a situation where the funding level of startups is tense given the financing environment. So I think it’s fair to say that the impact on ventures is even tougher than on the general economy."

Investor appetite likely to go down

Global stock markets fell broadly on Thursday as investors digested the impact of Trump’s sweeping tariffs.

They’re going to have a negative effect on investor appetite in the venture capital space as well, Wagner warns.

"It definitely makes things more difficult. The investor appetite has already come down given the macro environment. And now with the tariffs on top it just provides more insecurity," Wagner says.

"Because on one hand they will be more reluctant to invest in European startups with US connections or plants because it’s so hard to predict what is happening. And also they will question the supply chain implications. It will slow down due diligence processes, you will probably have to look much more into the supply chains and see whether you can reorganize those easily or not. So it slows things down, and certainly brings down the appetite even more. How big that impact is, it’s still too early to say."

It slows things down, and certainly brings down the appetite even more

Making Europe more attractive?

There could be some upsides to the tariffs, though, from a European point of view.

Craig Douglas, a founding partner at the German impact investor VC World Fund, agrees that the tariffs could wreak havoc on supply chains for startups. But he also sees the potential for Europe to emerge as a more attractive space for impact companies as a result.

“In climate tech, a lot of the materials come from China. So if it’s going to be a lot more expensive to ship those to the US, then it’s going to make Europe a more interesting place to sell to," Douglas tells Impact Loop.

However, Douglas did caution that there could also be a negative side to that coin.

If Chinese companies start selling more tech like batteries and wind turbines to Europe instead of the US, it could drive down prices and make it more difficult for European manufacturers to compete.

"We have to watch that relatively closely," he says. "Is this going to result in some products being shipped elsewhere that would have originally been bound for the US? … And the question is, does this mean we have to focus more on anti-dumping regulations in Europe as a preventative measure, rather than blanket tariffs?"

Greater access to talent

There could also be other potentially positive side effect to Trump’s tariffs – and his overall opposition to climate-friendly ventures.

"For impact startups, this could lead to having greater access to talent when they choose not to go the US," Jane Walerud, founder of Nordic VC Walerud Ventures which invested in a number of impact companies such as AirForestry and Paebbl, tells Impact Loop.

Douglas at World Fund is already seeing signs of that happening.

"Friends and colleagues of mine who have moved or are originally from the US are now seriously contemplating moving to Europe or starting their companies in Europe, because it’s just a more predictable place to do business," Douglas says. "And I think that’s going to play very much into Europe’s favour."

Douglas also says the new tariffs could also help stop the exodus of successful startups that move to the US in order to scale up.

"Typically, Europe hasn’t been able to scale companies to a sufficient size without US capital and the US market. I’ve been in Brussels quite a lot over the last couple of weeks, and there certainly seems to be an interest in really pushing European resilience. There’s going to be a lot more capital flowing in that direction, and I think these tariffs are only going to accentuate that even further."

An opportunity to build resilience

So how should Europe respond to these tariffs?

One way, several investors said, is for European companies to start looking more at markets other than the US.

Lowina Lundström, CEO of InnoEnergy Scandinavia, says the current situation presents an opportunity "for Europe to build more resilience and come together" – and build stronger ties to Asian countries like Japan and South Korea.

"These are markets with fantastic opportunities, synergies and skills to develop – which means that the future of impact companies does not stand and fall with the USA," Lundström says.

Wagner at Verve also saw the potential for European companies to take advantage of the situation.

"When we think about clean tech and energy and climate, you can see a few aspects that are positive," Wagner says. "I truly believe that if the Americans leave the field a bit uninvested for a couple of years, that could be a time when American buyers have to buy the technology from Europe. So that’s not necessarily a bad thing."

But, he added: "I think we should call a spade a spade, and these higher tariffs just make things more difficult for everybody."