The prospect of a trade war following Donald Trump’s victory in last night’s (5 November) closely fought US presidential election could prompt European companies to consider buying manufacturers in the US, dealmakers have told Mergermarket.

Trump, the Republican candidate returning to the White House in January 2025, has described himself as “Mr Tariffs” due to his longstanding belief in import taxes and “Made in America” tags. He has proposed a baseline tariff of 10% on all US imports, alongside other rates depending on origin.

The president-elect’s approach to tariffs should be viewed as “an opening gambit” to obtain trade concessions, said Eric White, Brussels-based consultant at Herbert Smith Freehills.

Having said that, the threat of tariffs will create an incentive for European corporates to look at US targets as a way of ensuring that products for the US market are made domestically, White said. This will be a complex exercise in sectors with global supply chains, like automobile manufacturing, he added.

European manufacturers who sell in the US without having stateside facilities are going to have to think about re-shoring and defensive M&A, one sector banker agreed.

Some international investors are bullish around US targets, agreed a US-based lawyer. Months of pre-election uncertainty about the direction of travel has come to an end, creating conditions for a new wave of dealmaking, he added.

Whatever one may think of the result, it is at least clear.

Prior to Trump’s victory, a range of international companies had already started looking at US assets in an effort to secure “made in America” credentials, said one European consultant. Incumbent President Joe Biden’s argument for so-called “friendshoring” exhibited a certain, albeit limited, degree of rhetorical continuity with Trump’s first term.

An example of a large cross-border deal came in April. Italian cabling company Prysmian [BIT:PRY] agreed to pay USD 1.1bn in cash for Texas-based Encore Wire [NASDAQ:WIRE], a manufacturer of copper and aluminum electrical wire and cables.

Encore said its products are “proudly” made in America at its vertically integrated, single-site, Texas campus. Meanwhile, Massimo Battaini, Prysmian’s newly appointed CEO, said the bidder will grow its North American presence as a result of the deal.

Mpac Group [LON:MPAC], a UK-based high-speed packaging and automation solutions producer, is an example of a European company that is vigilant to acquisition opportunities in the US. It bought Boston Conveyor & Automation (BCA), a Massachusetts-based supplier of robotic automation and conveyor solutions, in September and could consider further deals in the US and Europe.

Such acquisitions will become ever more important if Trump introduces tariffs from next year, the consultant added.

So far in 2024, European outbound M&A into the US saw 492 deals worth a combined EUR 85bn (USD 91bn), according to a Dealspeak EMEA column published on 21 October. The deal volumes, calculated by Mergermarket data, were up 10% on the same period last year.

There may also be dealflow in the opposite direction, dealmakers said. Tariffs tend to be inflationary, as 23 Nobel Prize-winning economists warned in an open letter during the campaign.

The dollar has soared following Trump’s overnight victory. The combination of a stronger dollar with the prospects of increasing inflation in the US makes European targets look increasingly attractive, said a second European lawyer.

Defence and shipping are two sectors to watch in Europe both in terms of domestic consolidation and cross-border M&A, dealmakers said. Trump’s election will encourage members of the North Atlantic Treaty Organization (NATO) to spend more on defence, which could be a catalyst for dealmaking activity, as reported.

Meanwhile, Trump has positioned himself as a friend of the oil and gas industry. Boosting supply would surely aid the already buoyant tanker segment in expanding further, a second sector banker said. WTI crude is broadly flat today at USD 72.02/bbl.

Nonetheless, major European airlines have enjoyed share price rises today amid Trump’s desire to “drill, baby, drill”, with British Airways and Iberia owner IAG [LON:IAG] up 3.1%, Air France KLM [EPA:AF] up 1.5% and Lufthansa [ETR:LHA] up 1.4%.

However, the first sector banker warned that oil prices could soar if Trump takes a hawkish stance on Iran.

As with so many aspects of Trump’s agenda, the prospect of an about-turn on a whim cannot be discounted. Defending against the president-elect’s caprice by building a solid US ground game may prove an expensive, but necessary, hedge for European exporters.