A huge year lies ahead for European IPOs with several substantial transactions being lined up for the first few months of 2025. The threat of trade hostility between Europe and the US, however, is doing little to promote pre-Christmas cheer among investors.

Universal tariffs, as proposed by US President-elect Donald Trump during his campaign for re-election, could severely harm several European industries, given the close trading relationship between the continent’s corporates and North America.

While a disjointed selection of cabinet nominees provides no clear view into the ultimate ideology of the next administration, Trump’s appointment for commerce secretary, Howard Lutnick, and newly announced trade advisor Peter Navarro are both known tariff hawks.

Next year is expected to be a big one for European IPOs led by the listings of sponsor-backed German pharmaceutical business Stada Arzneimittel, as well as the German business of TenneT, a Dutch state-owned power network manager, alongside a host of other large-cap deals.

Two ECM investors said that they hope 2025 to be a good year for IPOs, but they are beginning to get nervous over the protectionist rhetoric of the incoming Trump administration.

One said that while he was optimistic for 2025, the tariffs proposed by the incoming president pose a risk to the IPO market, particularly for companies that export to the United States or have large CapEx requirements in sectors the new president is suspicious of, like renewable energy.

This news service had already reported on the difficulties posed by the new administration to Chinese fast fashion Shein, which is reported to be in late-stage preparation for a London IPO.

But the problem for many IPO candidates, rather than any idiosyncratic threat from the new administration, could be an overall negative market sentiment if Trump creates a more hostile trading environment.

“The market has proven resilient to shocks this year, there was barely a response to the crisis in South Korea and the French government collapsing,” said an ECM lawyer. “Geopolitical risk is priced into the market. What will have more of an effect is Trump tariffs.

“They have the potential to upend the optimism in the market. The hope is that he adopts a sensible approach, but predicting his actions is difficult. Even he doesn’t seem to know what he’ll do each day.”

An ECM banker concurred on the risk but was more optimistic that sense would prevail at the end of the day.

“I think the market is very optimistic about 2025 being a big IPO year, obviously we don’t know what the new administration is going to do, so we have to see on that front,” the banker said. “Tariffs obviously an issue, but there are certainly hopes that some of the more business savvy people Trump has surrounded himself with this time will drive market friendly policy.”

Volfefe risk for follow-ons

Trump’s iconoclastic approach has always been part of his appeal, but his unpredictable attacks on global norms were a huge generator of equity volatility in his first term.

European after-hours block activity dropped like a stone in 2018 and 2019 on little more than President Trump’s Twitter proclamations on trade. While volumes have been muted since the start of 2022, this is due to global macroeconomic pressure and geopolitical events like the war in Ukraine.

The drop in follow on volumes during the first Trump administration was largely driven by the actions and words of the president.

This caused volatility indexes to spike, markets to fall and European equity issuers to pull back from overnight deals with US indices falling.

In response, JPMorgan created an entirely new volatility index, the Volfefe Index, to track the impact of Trump’s tweets on markets.

The president-elect has remained true to form, posting on social media in late November that he will impose heavy tariffs on Canada and Mexico over issues at the US border and the spread of fentanyl into the US.

A second ECM banker noted that the investors he was speaking to were still engaged across ECM deals, IPOs and follow-ons but added that could change should tariffs become concrete.

“There will be more selectivity in investment rather than a rising tide lifting all boats,” he said. “We will start to see certain sectors peter out and those that are deemed Trump beneficiaries march higher.”

No-one is yet talking about Trump’s second presidency in market-ending terms quite yet. But the return of the mercurial, and always-vocal, president to head the world’s most important economy once again threatens to disrupt market norms at a time when equity markets need stability, particularly with political turmoil in Europe, with various elections next year, and conflict still raging in Ukraine and the Middle East.

With Trump back in the White House, issuers and investors will need to remain on their toes. European equity capital markets will toast an improved year over Christmas, but they will be aware that their happiness in the New Year lies in the gift of President Donald Trump.