European hardware startups are scrambling to navigate supply chain uncertainty and rethink expansion plans as US tariff back-and-forths continue to wreak market chaos and a trade war with China intensifies.
Senior leaders have been rushing to schedule contingency plan meetings with boards and investors over the past week, as they look to protect runways and shelter themselves from the worst of the global economic fallout, founders and VCs tell Sifted.
Those meetings are still ongoing as the repercussions from US tariffs continue to unravel amid an escalating standoff with China and a baseline 10% tax on goods imported to the US remaining — despite a backtracking on more severe import taxes for some countries.
“Planning is now impossible,” the founder of one UK chip startup, who asked not to be named, told Sifted. “We’re hearing of M&A deals evaporating at the last minute, we’re expecting funding to be harder to come by and commercial partners are less interested in pre-product conversations with us.”
While tariffs immediately raised alarm bells in European tech when they were announced last week, hardware startups that have a presence in the US or supply chains linked to the country — or those that’ve been hit with tariffs — are most concerned.
Secondary implications are also panicking founders, including the purchasing power of customers who’ve seen stocks drop or are beginning to batten down the hatches amid fears of a global recession.
“There’s a lot of tension at the moment, everyone is trying to understand what’s going on, whether the Trump administration is bluffing or if tariffs are to stay,” says Alexis Houssou, the founder of hardware-focused VC HCVC. “It’s tough to make solid contingency plans until things settle down, so for now it’s mostly wait and see across the board.”
‘Minimising dependency on China no longer optional’
Some of the biggest concerns are coming from leadership meetings and board discussions at hardware startups which depend heavily on importing foreign components from China and sell into or have the US on their roadmap.
This includes sectors like consumer electronics, automotive, robotics, batteries and semiconductors. “Minimising dependency on China is no longer optional,” says Houssou.
He says that a lot of startups are considering relocating parts of their supply chains away from China to places such as Vietnam, India and Eastern Europe.
Some advanced manufacturing, automotive and industrial robotics companies “are eyeing customer bases in the Middle East and Asia to hedge against transatlantic turbulence,” adds Benjamin Wolba, founder of tech community European Defense Tech Hub.
Even startups which have supply chains shielded from the highest tariffs are concerned.
“Partial tariff exposure can translate into significant revenue hits, and leadership teams are accelerating scenario planning and market diversification,” says Benjamin Erhart, general partner at UVC Partners.
“We have no idea what our cost model will look like,” says the chip founder, who adds that manufacturing costs will be hit hard by tariffs across the supply chain, regardless of whether the US ends up imposing import taxes on semiconductors, which have remained exempt up to this point.
Ditch the US?
Some early-stage companies are rethinking whether to open in the US at all. Sylvain Dubois, the founder of Belgian semiconductor startup Vertical Compute, says that the company had been assessing whether to produce chips with manufacturing partners in Taiwan, the US or the EU — but any previous plans are up in the air.
“We discussed this topic in our last executive offsite and decided to accelerate a mitigation plan for our manufacturing strategy and business partnerships,” says Dubois.
Startups are also considering their commercial roadmap. “Rather than rushing into costly US manufacturing setups, which would be prohibitively expensive in many cases, most teams are diversifying their market focus, and recognising that Europe needs to build with more strategic self-reliance,” says Erhart.
Tom Vroemen, founder of industrial machinery startup Tetmet, tells Sifted that the company has dialled back on sales plans across the Atlantic as a result of tariffs.
“We were actually on the brink of launching a large business development effort in the US, but the instability and unclear position of international business has made us take a step back on that.”
Vroeman is now looking to double down on a sales push in the EU, in the hopes that American isolationism prompts a homegrown industrial revival, he told Sifted.
Others are looking to double down on the US market — following in the footsteps of a number of European crypto and defence companies that moved to deepen US ties as Trump entered office for his second term.
“Some startups were planning a US presence anyway and are now considering accelerating this transition,” Ion Hauer, principal at Apex Ventures, told Sifted.
Some VCs at the earlier stages are encouraging startups to stay their course in the hopes that things will change by the time they look to release a commercial product.
“Our advice is to keep on developing the key IP and continue working with US clients for proof of concept projects and testing — the tariff situation might have changed by the time large scale roll-outs will come in any case,” says Julia Flaig, principal at Join Capital.
For all the contingency planning and supply chain mitigation happening in boardrooms and leadership meetings at Europe’s hardware startups, founders tell Sifted that the uncertainty caused by the economic fallout of Trump’s tariffs could have lasting impacts.
“Leadership teams are trying to plan and reaching out to us and other startups to try to understand what their options are, but my concern is that any plans might change next week if the US does deals and tariffs change as a result,” says Simon King, partner at Octopus Ventures.
“It’s this uncertainty which is going to be hardest to deal with over the next few months.”
Read the orginal article: https://sifted.eu/articles/trump-tariffs-hardware-startups-crisis-mode-news/
