Investment Strategies
RBC Wealth Management Positive On China-EU Relations, Amidst Tariff Turmoil

The relationship between the US and Europe is changing, with consequences for the euro area and its economy. Frédérique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia, looks into the impact of this change in the corporate sector and discusses investment opportunities.
Frédérique Carrier, head of investment strategy for RBC Wealth Management, said this week that she sees a long-term trade resolution with China and the EU that reflects a less intense relationship than a few years ago.
Carrier emphasised how Spain’s Prime Minister Pedro Sanchez recently met with China’s President Xi Jinping to this end. Germany also seems anxious about fostering good relations with its biggest export partner. In October 2024, the German government voted against the introduction of EU tariffs on Chinese electric vehicles aimed at offsetting state subsidies provided by Beijing. “Though a new government is now in place, the vote highlighted both Germany’s reluctance to jeopardise a key export market and the broader challenge of forging a unified European approach to trade,” Carrier said.
However, Carrier believes that trade could remain relatively frozen in some products, such as semiconductors, telecommunications equipment, but flow more easily for others, for example consumer electronics, textiles and clothing, pharmaceuticals, food and beverages. Continued trade with China in non-sensitive goods could help cushion the blow of more difficult trade relations with the US, in her view.
Meanwhile, the US’s reciprocal tariffs are on pause until early July 2025, though 10 per cent universal tariffs are still in effect, as are 25 per cent sectoral tariffs on steel, aluminium, and automobiles.
US President Donald Trump’s administration is pondering tariffs on pharma, copper and lumber, with the former being the EU’s largest export to the US. For now, US trade policies have weighed on European consumer and business confidence. What is surprising to Carrier, however, is that despite the negative impact US tariffs are likely to have on the European economy, the euro has appreciated nearly 10 per cent against the US dollar. The euro’s strength is generally a sign of growing optimism around the euro area. This time, however, international investors, whose trust in US institutions has been shaken, are seeking to diversify some of their dollar holdings.
The extreme uncertainty in trade policies has led the International Monetary Fund to reduce its economic forecasts for major economies. It now expects eurozone GDP to grow 0.8 per cent and 1.2 per cent in 2025 and 2026, respectively, compared with 1.0 per cent and 1.4 per cent back in January.
The downward revisions were relatively small, due to the EU’s fiscal stimulus, which Carrier believes will likely cushion the blow. Prompted by signs that the traditional US security support could be withdrawn or at least downsized, the German parliament recently passed landmark fiscal stimulus measures. These include infrastructure investments of as much as €500 billion ($568 billion) over the next 12 years and the relaxation of the limit on structural deficits to allow for higher defence spending – a measure that effectively leaves defence spending unconstrained.
Meanwhile, the EU has proposed a plan to address deficiencies in the region’s defence capabilities by 2030 with recommended funding of up to €800 billion.
Carrier expects the strong euro and tariff uncertainty to compel companies to issue subdued full-year guidance. With 2025 consensus earnings growth expectations at 6 per cent, there is more downside to earnings expectations if a US policy-induced global growth slowdown materialises and if the euro maintains its strength. She believes stocks most affected are cyclicals sensitive to global growth, though dollar weakness is also a negative for European healthcare companies that derive a large portion of their revenues from the US. For 2026, earnings growth should bounce back by high single digits, in her view, due to German fiscal stimulus and the European Central Bank’s (ECB) loose monetary policy kicking in.
Valuations retreat
Early this year, European valuations expanded from depressed
levels as economic activity improved, the ECB loosened monetary
policy, and Germany embraced fiscal stimulus. US trade policy
uncertainty and the real possibility of high tariffs have set
valuations back. So long as a US policy-induced recession is
avoided, which is Carrier's base case scenario, she sees
this as an attractive entry point.
Carrier favours companies listed in Europe that are global leaders. She also recommends adding exposure selectively to companies that can benefit from the ongoing domestic fiscal impulse, including select high-quality banks, and companies in the materials and industrials sectors, including defence stocks.