Trump's ‘biggest deal ever' is no such thing, but I have faith in Europe

Times

4 days ago

European funds and shares jumped for joy when the American president, Donald Trump, announced he had agreed 'the biggest deal ever struck by anybody' with the European Commission president, Ursula von der Leyen. Unfortunately, the euphoria proved short-lived, as markets realised that this new deal means most companies in most countries will collectively pay billions more tax to trade in the world's biggest economy.
However, slashing tariffs from 30 per cent to 15 per cent on most exports to America represents a substantial improvement on earlier fears. Closer to home, the British prime minister, Keir Starmer, also met Trump at one of his Scottish golf courses to — among other things — tee up American import taxes set at 10 per cent for our cars and zero for aircraft engines, which Starmer hailed as safeguarding our world-class automotive and aerospace industries.
Coming down from the clouds of global politics and macroeconomics, this small, long-term DIY investor is glad I ignored many pessimistic predictions elsewhere to keep faith with British and continental funds and shares. This year's stand-out winner so far is a little-known London-listed investment trust, whose share price has soared 60 per cent since March.
That's when I paid 53p for Seraphim Space Investment Trust (stock market ticker: SSIT) shares, as reported here at that time. They traded at 85p at close of play on Friday.
One stellar attraction of this £239 million space technology fund is its focus on defence companies listed in Europe. These businesses are benefiting from increased demand from continental countries since America warned that everyone must pay more for our own security in future.
But Seraphim's chief executive, Mark Boggett, emphasised that extraterrestrial technology can also have more peaceful applications. He told me: 'Satellite-driven weather forecasts are increasingly vital to modern agriculture, providing real-time, precise data that helps farmers make smarter decisions about planting, irrigation, pest control and harvesting.
'By reducing the uncertainty of unpredictable weather, these forecasts improve crop yields, enhance resource efficiency and build resilience. Tomorrow.io, a Seraphim holding, is building its own satellite constellation to derive truly global data, enabling hyperlocal and highly accurate short-term weather forecasts.
• A robot surgeon? I'll put my money on that
'These have achieved some impressive savings: 20 per cent less crop loss due to unexpected freezes or hail, and $41 saved per acre in wasted irrigation costs.'
Less happily, bad weather in west Africa hit the cocoa harvest, pushing up the price of this commodity and hurting profit margins at the Swiss chocolate-maker Barry Callebaut (BARN). You might never have heard of this wholesaler but you have probably eaten its products, which are sold by better-known retailers such as the Cadbury-owner, Mondelez (MDLZ), and the KitKat-maker, Nestlé (NESN).
The world's biggest chocolate-maker provides another example of how it can pay to be sceptical about talk of trade wars and instead believe that commercial relations will continue, despite shocks along the way. Barry Callebaut shares I bought for 766 Swiss francs in April now cost SwFr1,008. This is an increase of 31 per cent in little more than three months, which tastes sweet enough to me.
On a sour note, Adidas (ADS), the German sports goods group, said Trump's tariffs would add €200 million to its costs because it makes 30 per cent of its trainers in Vietnam. That tripped up the share price, which plunged 18 per cent last week, causing this stock to fall out of my top ten. Ouch!
• FTSE 100 slides as markets retreat on new Trump tariffs
Higher taxes are bad for business, whatever opponents of free trade may say, because they transfer wealth from consumers and shareholders to governments. This explains why shares in the Dutch brewer Heineken (HEIO) slipped 7 per cent on Monday, despite it reporting higher than expected profits.
Dolf van den Brink, the chief executive of the business, whose brands also include Amstel and Foster's, pointed out that the beer it exports from Mexico to America continues to face 30 per cent tariffs. He said Heineken is considering shifting more production to America, adding: 'We look at all options from continuing with our current set-up, a more hybrid version, or otherwise.'
Amid all that anxiety and uncertainty, Heineken looks a bit hungover. But shares I bought for €45 in January 2014 were trading at €60 on Friday, yielding 3.2 per cent dividend income, so I intend to retain a glass half-full view of this global business.
Similarly, easily my biggest European shareholding is the Paris-listed Franco-Italian firm EssilorLuxottica (EL), which makes a third of all the optical lenses on this planet. Its best-known retail brands are the American sunglasses makers Oakley and Ray-Ban, which now offer artificial intelligence-enhanced eyewear via a joint venture with the Facebook and Instagram owner, Meta Platforms (META).
Sales of more than two million smart glasses since October 2023 suggest EssilorLuxottica is succeeding where earlier attempts at wearable technology failed. Google Glass, internet-enabled specs from the technology giant Alphabet (GOOGL), were largely withdrawn a decade ago and discontinued completely in 2023.
• A 20% return in 4 months? I'm riding the investment trust wave
But Oakley and Ray-Ban models, such as the classic Wayfarers, spare customers the embarrassment of feeling conspicuous and sales are rising strongly. While I have no wish to see share prices flashed up before my wondering eyes, this baby boomer likes the sound of discreet hearing aids, hidden away in stylish shades or spectacles.
Either way, EssilorLuxottica shares I bought for €96 in March 2019 were coming through loud and clear at €259 on Friday and are now my fourth-most valuable holding. It all goes to show why it can pay to look through short-term fears and instead invest in long-term hopes that international trade will eventually return to something nearer business as usual.
Even world-leading European healthcare companies cannot guarantee that shareholders will always enjoy healthy returns. Novo Nordisk (NOVO), the Danish pharmaceutical firm that was first to obtain authorisation for weight-loss wonder drugs, suffered a 25 per cent share price shrinkage last week.
A profits warning wiped €60 billion off what had been Europe's most valuable company. Sad to say, there may be worse to come as Novo struggles with American tariffs, copycat drugs and the risk that it could become collateral damage in Trump's improbable bid to take over Greenland, which is a protectorate of Denmark. Yes, really.
Mr Market is a manic depressive at the best of times, lurching from excessive exuberance to the depths of despair, and the drugs don't help. Despite the widespread popularity of Ozempic and Wegovy flab jabs, Novo has lost 66 per cent of its stock market value over the past year. What a downer!
Fortunately, I first invested more than four years ago, when few Brits had heard of this business, paying 254 Danish krone per share in June 2021, allowing for a subsequent stock split. Then I sold a five-figure parcel at DK926 last August, as also reported here at those times. They fetched just DK309 on Friday.
This raises the important point that it is never too soon to take a profit. If nothing else, we need to turn paper gains into real ones to compensate for losses elsewhere.
Another Danish pharma firm, Bavarian Nordic Research Institute (BAVA), where I paid DK258 last August, had slumped to DK123 before it recommended a takeover bid at DK233 on Monday. We can't win them all.
Full disclosure: Ian Cowie's shareholdings