European companies have been anxiously keeping watch on developments of the U.S. - China trade war these past few months especially after its further escalation. The trade war no longer just affects the United States and China - its effects have cascaded onto export heavy countries.

Many European economies are particularly vulnerable because the European Union as a whole is a net exporter. While some European companies could theoretically benefit by becoming the main exporters to the U.S. if China is kept out of the market; however, that would only apply to very few industries. As a result, business and consumer confidence has fallen in six of the past seven months in Germany with the country on the brink of a recession. Additionally, exports amount to almost half of Germany's output, particularly automobiles. Many European countries both manufacture and sell goods in the US and China, two of the world's largest economies which together constitute almost 2/5th of global GDP, thus the trade war has created quite a lot of uncertainty and instability in terms of their economic outlook. This uncertainty has already adversely affected global economic growth and business investment, which is now projected to rise by 1.7% in 2019 and 2020 compared to the 3.5% in 2017 and 2018.

The Trump administration has also placed tariffs on the EU itself, particularly on steel and aluminum. The EU responded by placing tariffs on $3.25 billion of US goods. According to Alicia Garcia Herrero and Jianwei Xu, economists at Natixis, European makers of cars, aircrafts, chemicals, computer chips, and factory machinery could potentially win by taking market share from Chinese or American producers and supplying to both markets. UNCTAD (United Nations Conference on Trade and Development) estimates that the EU would capture $70 billion ($50 billion from Chinese exports to the United States and $20 billion from US exports to China).

However, that is only if the trade war between the US and EU does not escalate any further. On the other hand, if President Trump succeeds at convincing China into entering a trade agreement that would reduce U.S's trade deficit, European competitors could lose out to U.S. companies. This is because in order to reduce the trade deficit, China would have to increase its import of goods from the U.S, thus reducing those that come from the EU.

Europe is not the only zone affected by the trade war. Countries in Asia including Japan, South Korea, Vietnam stand to both lose / win depending on how the trade war continues to unfold. The biggest issue for Europe; however, is not actually the direct impact of the trade war itself but the long-term implications that it has on the global economic system.