As Donald Trump’s second White House term gets underway, European startups are drawing up contingency plans for a potential rollout of punishing import tariffs.
While details of the new US president’s tariff plans remain murky, founders and VCs tell Sifted some startups selling products in the US — specifically in the consumer, hardware and deeptech sectors — have begun internally discussing options, including relocating headquarters and expanding operations to the US.
“If you don’t make your product in America then very simply you will have to pay a tariff,” Trump said on Thursday. The US president had previously threatened to impose a 25% levy on goods imported from Mexico and Canada, and described the EU as having been “very bad” to the US, saying its companies’ sales would be subject to tax hikes.
Startups in Europe have already been shaking up growth plans to adapt to the change in president across the Atlantic. Companies in the crypto and defence sectors have begun looking to deepen US ties as Trump has signalled plans to deregulate and increase government tech procurement.
“There’s a big difference between a 10% tax and a 30% tax, and we’re not going to know until it’s really here,” says Mark Boggett, CEO of Seraphim Space, a London-based space-tech VC. “We’re completely in the dark.”
Rafal Modrzewski, founder of a UK- and Sweden-based AI marketing company still in stealth, says the EU’s current trade policy isn’t well-equipped to handle the tariffs.
“Regulatory uncertainty, combined with Europe’s fragmented startup environment, puts additional pressure on early-stage companies trying to build global businesses.”
Supply chains and price hikes
European startups in sectors with high-value supply chains — like defence, deeptech, semiconductors, automotive and pharma — are closely watching how the US tariff policies unfold, says Simon Geale, executive vice president at supply chain consultancy Proxima.
“The mood music from the new administration could not only see direct one-to-one tariffs but also an effort to crack down on third countries and implement ‘rules of origin’ calculations,” meaning hiking tariffs on startups that use raw materials from certain parts of the world in their products, he tells Sifted.
European startups selling into the US that are building technology that rely on raw materials from China, like batteries and robotics components, for example, could be particularly susceptible to US tariffs.
“China is probably going to suffer the worst from US tariffs. If you are importing from China, you probably have the biggest risk,” says Karen McCormick, investment manager at Beringea, a UK-based VC with offices in the US.
Beringea held a session with its portfolio companies — some of which are selling consumer products in the US — in November after Trump’s election victory about potential tariffs, McCormick says.
It’s difficult to make concrete plans before knowing what those tariffs are going to be levied against, she says. However, should European consumer-focused startups be hit hard, one option could be to establish operations, including production and assembly of products, in the US.
Finnish startup HappyOrNot sells a physical device for consumers to input feedback in shops, and brings in half its revenue from the US.
Should tariffs end up being higher than 10%, the startup would consider building out manufacturing operations in the US, CEO Miika Mäkitalo tells Sifted. The company would also look to raise prices for the end consumer.
“Our goal would naturally be to attempt to raise customer prices in proportion to the tariffs, but we would likely need to accept some level of discounts and a reduction in our own margins,” Mäkitalo says. “If the tariff on the device were 10%, the total cost for the customer would rise by approximately 5%.”
Impact on future of European tech
Tariffs could also have ripple effects beyond hitting startups’ bottom line.
“The most pressing concern for founders isn’t the tariffs themselves, it’s the potential for indirect barriers that could reshape how European startups approach the US market,” says Modrzewski.
There are early signs that future US policies might favour companies that have a physical presence in the US and for an early stage startup coming out of stealth, that puts “immediate pressure” on founders to set up shop in the US, he says.
The threat of tariffs is also shaping his decisions around his company’s technical infrastructure: for example, whether to move its data localisation operations to the US or stick with European providers.
“While US providers offer better technical capabilities, this decision now carries both technical and political implications, especially regarding data privacy and GDPR compliance.”
Jack Wang, principal at Project A, tells Sifted that he’s concerned that high tariffs on European companies could make homegrown founders think twice about setting up companies in the region.
“European founders could either simply start their company in the US (and stay there) — as many do today going to Y Combinator — and flip the company to the US earlier,” he tells Sifted. “This will drive more founders to start their business directly in the US instead of Europe, leading to a bleeding local talent pool.”
Funding prospects for European startups that are impacted by tariffs could also be hit, as investors consider their impact on a company’s revenue margins and the return on their investment compared to US companies, he adds.
Read the orginal article: https://sifted.eu/articles/trump-tariffs-europe-startups-news/
