Europe Inc Wakes up to Trump's New Tariff Reality

European Businesses Face Challenges Amid Trump's New Tariff Policies

By Josephine Mason and Adam Jourdan

LONDON/MARSEILLE, France (Reuters) -As U.S. President Donald Trump's new tariff regime clicks into gear on Friday, producers around Europe are feeling the impact, some holding back shipments, others hiking sticker prices or taking a hit to margins. Some fear they won't survive at all.

The United States will impose a 15% tariff on most European exports from Friday, part of a wider barrage of levies set to redraw global trade. While down from even more elevated threatened rates, the tariffs are the highest since the 1930s.

"Companies are waking up to the fact that we're dealing with an historically higher tariff rate," said International Chamber of Commerce Deputy Secretary General Andrew Wilson.

"It's difficult to see that moving unless there are catastrophic consequences of the U.S. economy."

He added the chamber was seeing shipment delays and companies reassessing supply chain strategies. Trading with the United States was now "hellishly more difficult."

"The complexity of doing business with the U.S. has gone to levels nobody could have imagined," he said.

In Germany's Moselle Valley, winemaker Johannes Selbach said tariffs were damaging for the industry on both sides of the Atlantic. They had been hoping for zero-for-zero tariffs, but face 15% for now, with sector specific talks ongoing.

"The tariffs hurt the Americans and they hurt us," Selbach said in a warehouse surrounded by crates of wine with "USA" written on them in black letters.

"Thousands of families who produce wine in Europe and thousands of families in the importing, wholesaling, retailing, restaurant business in the U.S. are dependent on the flow from both sides," he said, adding jobs and profits would be hit.

Different sectors face varying degrees of pain. Higher-end luxury brands have more pricing power to adapt to the tariffs. Big companies can swallow some margin loss or shift some production into the United States, though often not all of it.

Even big consumer firms like Procter & Gamble have flagged U.S. price hikes to deal with the tariff impact. Adidas said it could increase prices.

Reuters' global tariff tracker shows at least 99 out of nearly 300 companies monitored have announced price hikes in response to the trade war, most from Europe.

Trump has said the tariffs are a response to persistent U.S. trade imbalances and declining U.S. manufacturing power, and that the moves will bring jobs and investment to the nation.

WE CANNOT RELOCATE CHAMPAGNE VINES

Diverging U.S. tariffs globally remain a challenge, however, with big manufacturing centers like Mexico, Canada, India and Vietnam having higher rates than others like South Korea or Europe.

Smaller players often can't make quick changes to production and supply chains.

Hugo Drappier, a champagne maker who runs his own firm Champagne Drappier, pointed out that the bubbly beverage could only be produced in a particular region of France.

"It's an industry that employs a lot of workers who can't be relocated, precisely because the work is done here. We don't have the option of relocating champagne vines elsewhere in the world," he said.

He said some orders had been held up due to tariff uncertainty, though he retained hopes that trade talks were becoming more positive, with the 15% rate better than previous threats of 30%.

Laurent Cohen, CEO of family-owned perfumery Corania, based in a northern suburb of French city Marseille, is scouring for new markets and ways to maintain business in the United States, which accounts for a quarter of sales.

That may mean a hit to margins and higher U.S. prices, he said.

"I praise the fact that we are no longer in a state of uncertainty," he said, referring to the U.S. trade deal.

"But with 15% customs duty on our products - which are affordable perfume products - we will now have to show immense ingenuity to keep on going in the U.S. market."

(Reporting by Josephine Mason and Adam Jourdan in London; Clotaire Achi and Michaela Cabrera in Urville, France; Manon Cruz in Marseille; Stephane Nitzschke, Andreas Kranz and Swantje Stein in Zeltingen, Moselle Valley, Germany; Ardee Napolitano in Paris; Writing by Adam Jourdan; Editing by XX)