How Europe’s startup ecosystem is reacting to a new era of tariffs and trade tensions

For European tech founders, the return of aggressive US trade tariffs marks a moment of strategic recalibration.

A tariff is a government-imposed tax on imported goods or services. Tariffs are used to protect domestic industries, raise revenue, or act as leverage in global negotiations. 

On April 2, 2025, US President Donald Trump announced a comprehensive set of tariffs aimed at reshaping America’s trade relationships. Effective April 5, a universal 10 per cent tariff will be imposed on all imports into the United States. 

Additionally, higher “reciprocal” tariffs will target specific countries with significant trade surpluses or perceived unfair trade practices. For instance, China faces a total tariff rate of 54 per cent, Vietnam 46 per cent, and the European Union 20 per cent. ​

European Commission President Ursula von der Leyen described the tariffs as a “major blow to the world economy” and indicated that the EU is preparing further countermeasures to protect its interests. ​

Tech.eu reached out to startup founders and investors across Europe to understand how the tech community is responding and whether this could be a catalyst for positive change.

The US will no longer be the default expansion market

Mellow is a Cyprus HR-tech company supporting freelancers with tax and social security solutions. 

CEO Pavel Shynkarenko believes the US tariffs will accelerate two major shifts: a push for tech sovereignty in Europe and a pivot away from the US as the default expansion market:

Louis Fearn, Principal at InMotion Ventures shares this view, suggesting that “Trump’s tariffs will force companies to rethink where they build, source, and scale. 

“Diversification is now a survival strategy, not just a nice-to-have. Europe must respond with bold investments in its own supply chain, infrastructure, and startup ecosystem.”

According to Shynkarenko, “the new 20 per cent tariffs aren’t just about Europe. 

“They reflect a broader U pivot toward economic isolation. 

While software startups may be insulated, deeptech and hardware players will feel real pain—higher costs, tighter supply chains, and more investor hesitation.”

UK startups face significant challenges 

Thomas Adcock, Tax Partner at Gravita (UK) believes it will be interesting to see whether the UK can agree on an economic package with the US to take us out quickly. 

Unlike the EU, the UK is not imposing retaliatory tariffs, positioning itself as a cooperative partner rather than engaging in a trade dispute.

Adcock contends that “this approach puts the Prime Minister under pressure, balancing ties with both the EU and the US, which are both crucial trading partners. 

“For UK businesses, these tariffs will create significant challenges, potentially giving US companies an advantage in servicing the UK market.

This will likely lead to increased imports of lower-cost US goods, negatively impacting UK industries facing competition from cheaper US manufacturing.”

Tariffs may push XR studios toward hybrid game models

Bobby Voicu, CEO and co-founder of XR gaming company MixRift suggest that in gaming, the tariffs will impact audience growth:

“Since XR is a hardware driven space, for the moment, and most devices are made in Asia, the prices of the devices in the US will go up. And since a really big slice of the XR audience is US based, I think we’ll see a lot less devices sold as a consequence.

On the other hand, I think a lot of gaming studios in the space will start looking at hybrid (XR and mobile) games, to mitigate this. Meta’s Horizon Worlds is an interesting example to watch in this context.”

Europe must retaliate 

Mark Pearson, founder of Fuel Ventures doesn’t mince words, asserting that the tariff is “a negotiation tactic, pure and simple.” 

“But you can’t back down. If Europe doesn’t retaliate, it gives the US too much power to dictate the rules. We need leverage.”

A new global trading pattern could create opportunity for Europe

Plenty of startup founders (and investors) are confident Europe’s ecosystem can maintain or expand on its strengths locally and in new markets.

Calum Chace, co-founder of Conscium (UK) has a similar approach and asserts that necessity is the mother of invention, and tariffs will curtail trade and boost inflation. 

“Making TSMC’s chips more expensive and perhaps more scarce may provoke innovation into new types of chips, including neuromorphic chips, which offer benefits of energy consumption and flexibility. The UK has pedigree in this area, so this could be an opportunity.”

 TSMC committed $65 billion to chip manufacturing in Arizona, although it has struggled to get the construction work done and to integrate the US workforce. It has also pledged to spend another $100 billion in the US, but that may or may not materialise.

“TSMC will be keen to avoid being damaged by the US tariffs, but it will also be keen not to dilute the importance it represents as an incentive for the US to defend Taiwan against Chinese aggression – which is very much on display at the moment.

“If – and it’s a big if – the tariffs endure, then trade flows will re-orient away from the US. The global supply chain is complex, and dramatic changes like this normally take time. 

A new global trading pattern in which the US plays a smaller role could enable Europe and other countries outside the US-China AI Duopoly to finally step up and play a full role in the development of the world’s most important technology.”

Marc Bouchet, Senior Associate at TDK Ventures, believes Europe’s unique strengths in talent, automation, and advanced manufacturing could position the continent as a valuable partner in a more fragmented global economy. He suggests that many founders have seen the writing on the wall for a long time, especially in climate tech: 

“They have diversified their customer and go-to-market approach so that a slowdown in the ability to compete economically to win US customers does not mean a drastic slowdown for all commercial activity.

Bouchet suggests that tariffs will likely depress European markets in the near term as a net exporter to the US, but the long-term vision for Europe as a partner to other global regions in the absence of a more isolationist America is compelling. 

How can Europe leverage its unique capabilities in talent, automation, and manufacturing to deliver valuable products to willing buyers elsewhere around the world? How can innovators and startups work with established European industries to boost their economic competitiveness in non-US markets? 

How can Europe become the home for world’s brightest talent in the face of defunded American academic institutions? These are the exciting questions I hope Europe can answer thanks to the threat of Trump’s agenda.”

Peter Geldhof, CEO of Nomadesk, a secure B2B file-sharing platform, is betting on rising demand for EU-based digital infrastructure.

Nomadesk.com was founded 21 years ago.  Geldhof recalled:

“Back then, we had a Dropbox-like vision — before smartphones, and well before Dropbox, Google Drive, or OneDrive became household names.

We sold the company in 2017 to Unifiedpost Group, only to buy it back about 20 months ago.  We’re now breathing new life into the platform, repositioning it as an Enterprise File Sharing solution with a strong focus on data governance — a solid (pun intended) alternative to US-based market leaders.

Geldhof calls the tariffs “a pure B2B play.” and believes that many companies in the EU (or RoW) will begin looking for trusted alternatives to Dropbox and Google Drive, “not just due to concerns around the US Patriot Act (with Trump at the buttons), but also because of potential EU tariffs on US tech services.”

“AI can help us manage rapid change”

David Villalón is the CEO and co-founder of Spanish startup Maisa. ​Maisa has developed the Vinci Knowledge Processing Unit (KPU), an agentic AI system designed to automate complex, knowledge-intensive business processes with full traceability and accountability. It ensures that each decision is transparent and auditable, addressing common issues such as AI “hallucinations” and the opacity of black-box systems. 

This approach makes it particularly suitable for industries where compliance and accuracy are critical. 

Villalón contends:

“As Trump’s tirade of tariffs starts to bite, global trade faces chaos. The good news is, unlike the 1930s, 

AI can help us manage rapid change. It’s a commercial opportunity for tech founders—whether that’s tracking shifting policies or adapting global supply chains in real-time.”

The EU must protect European businesses and R&D 

Tom Henriksson, General Partner at OpenOcean sees the tariffs as a “major, but not mortal” threat also to Europe’s startup ecosystem but cautions that their impact is 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.

“Europe may be able to go it alone one day. That day is not today. It is crucial that the EU protects European businesses, ensuring they remain as insulated as possible from the impacts and safeguards Europe’s world-leading R&D.

“Also startups that provide digital products should be prepared for increased instability driving more caution from both customers and investors.

The best placed European firms will be strategic, weighing up the cost pressures and moving quickly to refocus and capitalise on new opportunities that this era for global trade can create.”

What’s clear is that Trump’s tariffs are more than a trade policy. For Europe’s tech ecosystem, this could be a turning point: a chance to invest in itself, break dependencies, and build a more sovereign, resilient future.