Europe Warily Watches U.S.-China Trade War

Europe was not directly targeted in the wave of U.S. tariffs that took effect on Tuesday, but the effects are being felt here.

Keyu Jin, a professor at the London School of Economics, said tit-for-tat tariffs would lead not necessarily to less global trade but to a “fragmentation and regionalism” that forged new blocs aiming to be “nonaligned” in the intensifying trade war between the United States, its neighbors and China.

She was speaking on a panel Tuesday in Barcelona, Spain, at one of the world’s biggest tech trade shows, which runs this week. The annual event, known as Mobile World Congress, attracts more than 100,000 people for product pitches, fund-raising appeals and debates about the future of technology.

The fresh U.S. tariffs on Canada, China and Mexico — the three largest U.S. trading partners and crucial cogs in many supply chains — were a common topic of conversation around the expo center. European companies are heavily represented at the event, and some executives tried to frame the rising trade tensions as an opportunity for Europe, whose sizable economy has often been held back by slow growth and a lack of competitiveness.

The recent mobilization of European leaders to step up military support of Ukraine was cited as an example of deeper European integration that in the past tended to fizzle out. But the suspension of U.S. aid and the urgency of Ukraine’s plight — Prime Minister Keir Starmer of Britain recently described it as “a crossroads in history” — could spur greater continental cooperation, executives said.

Investors have piled into stocks of European defense companies that stand to benefit from stepped-up military spending. And European markets, in general, have outperformed U.S. stocks in recent weeks, even after slipping on Tuesday after the U.S. tariffs went into effect and some targeted countries retaliated.

Some of the tech execs in Barcelona say this is not a coincidence: Companies with European-focused operations and supply chains may be seen by global investors as a sort of geopolitical hedge against the tariffs and trade tensions arising from the United States. Take, for example, the stock market index tracking European telecoms, long seen as a somewhat sleepy backwater, which is up about 12 percent this year alone.

But this thesis will be tested soon, when President Trump plans to widen the scope of tariffs to cover all U.S. imports of steel, aluminum, copper and cars, as well as “reciprocal” tariffs against countries to address what he calls “unfair” relationships and to compel companies to move manufacturing to the United States.