Trump tariffs hit European VC: ‘They’re bad for everyone’

European VC firms are weighing up the impact of Donald Trump’s punishing array of tariffs on the continent’s startup ecosystem. 

Last week, the US president forged ahead with his long-trailed “Liberation Day”, slapping unprecedented import taxes on goods shipped into the US from around the world. The package saw some investors lose billions of dollars on the stock market — and others their appetite for risk.

Research shows many LPs have long been overexposed to the private markets like VC and PE, which are generally riskier investments than broad stock market bets. As Trump’s economic experiment unfolds, experts tell Sifted they are likely to pull back from the private markets in search of lower-risk investments. 

Sifted spoke with seven VCs across Europe, who voiced both anxiety and optimism over the potential outcomes for the continent’s startup investment landscape. 

“You might see some of these bigger LPs being a bit cautious about putting more money into VC, at least in the short-term,” says Adam Shuaib, general partner at London-based VC firm Episode 1, when asked about the potential knock-on effects of Trump’s tariffs. 

Market instability could encourage LPs to put more of their cash into fixed income, such as “safe haven currencies like the Swiss franc or the Japanese yen, for example, which happens whenever risk spikes globally,” Shuaib adds.

Market convulsions have already hit later-stage companies. Last week, Swedish fintech Klarna reportedly postponed its long-awaited float on the New York Stock Exchange due to the instability. American companies like Stubhub and Medline followed suit.

“We expect late-stage private markets will suffer because crossover funds that are usually active in both public and private segments will likely pull back,” says Christian Meermann, cofounder and partner at Berlin-based Cherry Ventures. 

“We anticipate this leading to more disciplined investments, and valuations coming down, particularly in late-stage AI markets.” 

Investor optimism 

As share prices collapse the world over, some European investors voiced optimism about the potential for new startups to emerge from the wreckage. 

“As in every crisis, now is the best time to found a company,” says Benjamin Erhart, partner at UVC Partners, which has offices in Munich and Berlin. 

“VCs that bet early on sectors that are on the rise receive positive attention and continue to be able to raise funds. From an investment point of view, the European early-stage tech asset class has become a viable alternative.” 

Alex Stöckl, founding partner at Zurich-based Founderful, agrees. He tells Sifted that early-stage fundraising ought to remain “largely unaffected” as smaller startups are relatively insulated from the ups and downs of the public market. 

“For late-stage, venture fund, growth or IPO — maybe it’s harder right now as people are worried about public markets; people are worried about the impact of these measures on revenue developments.”

A number of European startups have sought funding from the US, tried to enter its markets or rely on components produced there. Were the current situation to spiral into a full-blown trade war, there may be some opportunities for European players to pick up the shortfall, according to some. 

“The emergence of a potential new global order could see industries that were traditionally less attractive for VCs become more so,” says Mehmet Atici, managing partner at VC firm Bek Ventures. “That could include hardware and startups creating or trading in physical goods as Western companies seek to diversify manufacturing locations to minimise risk.”

While there remains the possibility of some upsides, several investors told Sifted the tariffs were bad for business. William McQuillan, a partner at London-based Frontline Ventures, says: “We believe Trump’s tariffs are ultimately bad for everyone — creating inefficiencies, increasing costs, and slowing down innovation.”  

He adds: “But the bigger concern is emotional: policies like these shake investor confidence, and that cautious mindset can linger longer than the policies themselves.”