Potential Impact of Donald Trump's Re-election on Europe's Corporate Earnings

Goldman Sachs analysts warn that Donald Trump's potential re-election as U.S. President could severely impact Europe's corporate earnings. Trump has promised to impose a 10% tariff on all U.S. imports, including those from Europe, potentially wiping out earnings growth through the impact on gross domestic product (GDP) and European company earnings per share.

Goldman Sachs analysts have cautioned that a re-election of Donald Trump as the next U.S. President could severely impact corporate earnings growth in Europe, mainly due to the former president's proposed 10% tariffs on all U.S. imports, including those from Europe.

According to the Wall Street brokerage, the implementation of Trump's policy could reduce Europe's gross domestic product (GDP) by 1 percentage point (pp), consequently erasing about 10% of earnings for European companies. However, some compensatory factors, like a stronger dollar and weaker European currencies, could mitigate this impact somewhat, leading to an estimated 6-7 pp reduction in European earnings per share.

Goldman Sachs strategist Sharon Bell highlighted that Market expectations for Trump's return to the White House are at approximately 70%. The proposed tariffs may also affect the U.S. GDP, potentially reducing it by 0.5 pp, while European utilities and healthcare sectors could emerge as primary beneficiaries. In contrast, the autos, industrials, and financial sectors within Europe are likely to face adverse effects.