Exploring ‘Europhoria’: New opportunities in the Old World

22 April 2025

As the Trump administration seeks to make America great again and imposes new tariffs on the world, it could help drive a wave of capital towards companies and entrepreneurs in Europe.

Investors were swept up by ‘Europhoria’ in March, envisioning a more self-reliant European economy after the European Union’s announcement of a defense fund[1] that excluded US and UK arms manufacturers. Europe's STOXX 600 reached a record high in March,[2] buoyed by a rally in defense stocks that analysts[3] saw as an early indicator of a broader shift.

But then came President Trump’s ‘Liberation Day’ tariffs on 2 April, which included steep levies on America’s allies on the old continent, and the start of wild market volatility. Much more severe than anticipated, €400 billion of the Eurozone’s €500 billion of exports to the US were impacted by the tariffs, according to Jefferies.[4] Export-driven European indices like Germany’s DAX or France’s CAC took a body blow from which they still have not recovered.

Dismissing Europe’s resolve[5] to reduce its economic reliance on the US would be premature, though.

As global trade adjusts to a more fragmented reality and Europe contends with an increasingly antagonistic US administration, the region's policymakers, investors and entrepreneurs are mapping out plans to decouple – but not completely – from the US. While it won’t be easy, European governments are keen to reduce regulations and pivot toward trade partners such as Argentina, Brazil, India and Vietnam.

At the end of last year, European investors held approximately US$9 trillion of US equities — around 17%[6] of the total market. If European entrepreneurs can weather the coming tariff storm and remain competitive against US and Chinese players, those investors could start redirecting capital toward companies on their side of the Atlantic. 

If that happens, the years ahead could be golden for European entrepreneurs. For long-term shareholders and start-up founders, securities-backed financing offers a flexible funding avenue to ride these emerging waves of opportunity.

The fundamentals for a stronger Europe: New trade corridors, credit and updated regulations 

Europe will continue to host globally-oriented firms, especially in frontier technologies. The region already has a leading position in bioengineering, quantum computing and next-generation connectivity.[7]

Still, new markets for core European exports — such as machinery, vehicles and chemicals[8] — are the most pressing needs. To offset US tariffs, Europe has made overtures like agreeing to increase American gas imports[9] and lifting tariffs on bourbon, wine and dairy products.[10]

Deeper diversification will come through trade relationships elsewhere, though. Deals are in progress with India,[11] the Association of South East Asian Nations (particularly, Vietnam[12]) and possibly South America’s Mercosur bloc.[13] Rising incomes in these markets will lead to growing demand for both intermediate goods and finished products – areas where Europe has strong global brands and robust intellectual property protections.[14] Europe’s demographics also help. Over 25%[15] of European households include someone born abroad or with foreign-born parents, strengthening cultural and trade links to these fast-growing economies.

While these markets aren’t comparable in scale to the US and China — which together represent 43%[16] of global GDP — finding new markets is urgent. Germany’s car exports to China fell by 25%[17] between 2018 and 2023, for example. Meanwhile, rising Chinese exports in much the same goods categories are expected to flood global markets,[18] as those bound for the US face tariffs as high as 145%[19] as of April 11.

Germany, the EU’s economic engine, will be pivotal. Chancellor-in-waiting Friedrich Merz declared recently that Germany is “back on track”,[20] after effectively scrapping the 'debt brake',[21] a constitutional limit on government borrowing, and potentially unlocking €1 trillion to finance infrastructure and defense projects. Spending on this scale would significantly benefit German businesses and strengthen Europe’s economic resilience.

European technology companies could get also a lift from new geopolitical realities. In March, more than 90 European tech firms and industry groups called on European Commission President Ursula von der Leyen to create a sovereign infrastructure fund[22] to boost investment in innovation. Many are also advocating for streamlined digital processes and a pan-European legal framework[23] to allow start-ups to scale more easily across borders.

Still, entrepreneurs must temper optimism with realism. Red tape,[24] complex European tendering requirements and labor shortages frequently hinder capital deployment. With a median age in Germany of 45[25] and 340,000 STEM academics[26] expected to exit the workforce by 2035, turning capital into innovation and growth won't be easy.

Private capital will be required to make Europe great again, though, and from all sources. The continent’s banks and funds will play their part, but the growing range of alternative capital providers – including those offering securities-backed financing – will also be critical.

Ultimately, just as[27] explorers from the ‘Old World’ once undertook voyages that changed global history, this generation of European entrepreneurs will define the region’s role in the 21st century. They will need all the financing they can get.

[1] https://www.ft.com/content/eb9e0ddc-8606-46f5-8758-a1b8beae14f1

[2] https://stoxx.com/index/sxxp/

[3] https://www.reuters.com/markets/europe/make-europe-great-again-trades-are-gaining-traction-2025-03-31/

[4] https://www.ft.com/content/c2b84be5-e94a-48bf-b154-b5ec1c86baa5

[5] https://www.euronews.com/my-europe/2025/02/24/germanys-merz-marks-shift-by-betting-on-an-eu-less-dependent-on-us

[6] https://www.federalreserve.gov/releases/efa/international-portfolio-investment-figure3.pdf

[7] https://reports.weforum.org/docs/WEF_Europe_in_the_Intelligent_Age_2025.pdf

[8] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods

[9] https://www.ft.com/content/4ba2bdb2-1588-418e-a9a1-b358ec46850a

[10] https://www.ft.com/content/180063de-15a8-4077-8daf-a6a591e117ec

[11] https://www.bbc.com/news/articles/c0eggy1104po

[12] https://www.reuters.com/world/europe-prepares-charm-offensive-vietnam-amid-us-trade-risks-2025-03-04/

[13] https://www.politico.eu/article/donald-trump-pushes-france-reassess-trade-alternatives-mercosur-deal/

[14] https://clarivate2023indexrb.q4web.com/news-events/press-releases/news-details/2021/First-Ever-Clarivate-Top-100-Best-Protected-Global-Brands-Report-Reveals-those-that-Demonstrate-Robust-Brand-Strength-and-Protection/default.aspx

[15] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Foreign-born_people_and_their_descendants_-_household_composition

[16] https://www.bbc.com/news/articles/c4g2089vznzo

[17] https://market-insights.upply.com/en/the-evolution-of-eu-china-trade-in-the-automotive-sector

[18] https://www.ft.com/content/0ab0aed5-4924-4234-9d8b-04154664488c?segmentId=114a04fe-353d-37db-f705-204c9a0a157b

[19] https://www.bloomberg.com/news/articles/2025-04-10/trump-tariffs-on-china-now-at-least-145-as-trade-war-ramps-up

[20] https://www.reuters.com/world/europe/german-coalition-deal-expected-around-midday-sources-say-2025-04-09/

[21] https://www.nytimes.com/2025/03/18/world/europe/germany-debt-brake.html

[22] https://www.reuters.com/business/aerospace-defense/airbus-others-call-sovereign-infrastructure-fund-buy-european-2025-03-17/

[23] https://www.ft.com/content/21db8861-f56a-4846-8bf8-4d42f322f378?segmentId=b0d7e653-3467-12ab-c0f0-77e4424cdb4c

[24] https://www.reuters.com/world/europe/german-coalition-deal-expected-around-midday-sources-say-2025-04-09/

[25] https://www.destatis.de/EN/Themes/Society-Environment/Population/Current-Population/Tables/population-by-territory-and-average-age.html

[26] https://www.reuters.com/markets/europe/german-fiscal-bonanza-no-quick-fix-red-tape-labour-snags-weigh-2025-03-21/

[27] https://www.merriam-webster.com/dictionary/old-world?show=2&t=1417643287#h2

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