European tech leaders were left reeling after Donald Trump imposed a wave of tariffs on foreign goods imported into the US.
On Wednesday, Trump announced a universal 10% tariff on all imports and higher rates for many countries around the world, including a 20% tax on goods from the European Union.
Founders, VCs and industry experts tell Sifted tariffs could drastically impact supply chains, global interest rates and the flow of VC capital into startups.
Optimistic onlookers suggested the tariffs present an opportunity for Europe to double down on tech sovereignty, while others warned they could lead to homegrown startups to relocate to the US.
“Trump’s tariffs will undeniably squeeze European startups,” says Vitor Monteiro, cofounder and CTO of Portuguese AI innovation studio Unflow. “They will raise immediate costs on hardware imports, software licenses, and cloud infrastructure and potentially throttle essential funding pipelines.”
“It’s an economic gut punch for European startups that could stall critical innovation and throw growth-stage companies into uncertainty.”
‘This is going to be painful’
European startups have been watching the other side of the Atlantic with bated breath since Trump entered office in January. Back then, many told Sifted they were bracing themselves for a tariffs rollout and drawing up contingency plans for potential punishing import taxes.
“If fully enforced, these sweeping US tariffs could add friction to European startups with global ambitions,” says Claire Trachet, CEO of fundraising and M&A consultancy Trachet.
“It’s a signal that the external environment is becoming more complex, forcing founders to reassess where they build, raise and scale.”
The most direct impact will be felt by startups selling physical products and hardware into the US — or by those that buy from companies heavily impacted.
“This is very concerning,” says one founder of a chip startup in Europe, who asked not to be named. He tells Sifted that any companies using products and tech from Taiwanese semiconductor giant TSMC — which is facing large tariffs itself — have just seen their cost bases ratchet up.
“On top of that, there are hints of further semiconductor-specific tariffs yet to come,” he adds.
Europe’s dependence on US companies for compute — something which many European startups rely on to train AI models — could impact startups in the region, says Jonatan Luther-Bergquist, partner at Berlin-based VC firm Inflection.
“We’ve outsourced everything from AI training capacity to high-performance infrastructure,” he tells Sifted. “If you’re a European startup relying on US-fabricated chips, hyperscaler GPUs or dollar-priced compute contracts, your roadmap just got a lot more uncertain.”
Selina Tirtajana, cofounder and CEO of SOVN, a smart earbud company based in the Netherlands, tells Sifted her company expected most sales to come from the US this year, but the tariffs will force some difficult decisions.
“We’ll have to decide whether to pass the cost to consumers, which is against our mission of accessibility, or absorb the margin hit, which is difficult for a hardware startup whose margins are heavily scrutinised by potential investors,” she says.
“We discussed having a US subsidiary and manufacturing in the US, but with all the political and economic instabilities there, we didn’t seriously consider it.”
Software-based businesses could also suffer, says Dom Hallas, executive director at lobby group Startup Coalition.
“If you’re a software business tariffs are rarely something you think about — but the scale of what we saw yesterday means it’s now not just about you and your supply chains, it’s about the global economic outlook too,” he says. “This is going to be painful.”
Those indirect impacts could be hitting spending power of customers and investors, says Tom Henriksson, general partner at OpenOcean.
“These tariffs are so far-reaching that the ripple effects should be expected to hit everyone — whether direct demand in Europe or indirect suppliers who rely on the American market,” he says, adding that Europe doesn’t yet have the sovereign capabilities to operate independently of the US.
“Europe may be able to go it alone one day. That day is not today.”
Investor caution
There are some areas of the European tech sector that could benefit from Trump’s tariffs, as Europe’s sovereign capabilities come under the spotlight.
“For European startups in industrial and defence tech, this isn’t a detour, it’s acceleration,” says Daniel Carew, a Partner at VC firm Join Capital. “The need for sovereign capabilities in compute, manufacturing, and security infrastructure has never been more urgent or more investable.”
While some point towards the potential for greater funding for homegrown startups from governments in Europe — as states look to ramp up spending on tech sovereignty — others say the region could also see a flight of talent to the US.
“Startups that work in some of the most affected industries like automobiles and pharmaceuticals will suffer and may consider relocating production and manufacturing facilities to the US,” says Alvaro Alvarez del Rio, investor at Boost Capital Partners.
Others warn that tariffs could cut the flow of VC dollars into European startups, putting pressure on US investors to back startups locally rather than globally, says Alex Neves, cofounder and CEO at foodtech Clean Food Group.
This could create a hole in European funding pipelines — which US VCs contributed more to than European counterparts in 2024, according to Dealroom.
Europe-based investors’ willingness to splash the cash could also be impacted by tariffs.
“Unfortunately for startups, interest rates may remain higher for longer, leading to fewer venture dollars and compressed valuations,” says Barney Hussey-Yeo, founder and CEO at UK-based fintech Cleo.
“Those planning to go public or raise funds in 2025 may delay until 2026.”
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