Morgan Stanley: Trump tariff threat poses limited broad risk to Europe stocks

Morgan Stanley's analysis suggests that President Trump's latest tariff threat regarding Greenland poses limited broad risk to European equities. The impact on revenues across the MSCI Europe index is estimated at only 2.2%, indicating that the threat is more of an 'idiosyncratic' shock rather than a systemic one. This implies that affected companies account for about 10% of the index's weight, with defense stocks likely to benefit. Trump has warned of potentially imposing tariffs of up to 25% on eight European nations unless the U.S. is permitted to purchase Greenland, which has pressured EU leaders to consider countermeasures including retaliatory tariffs. There is also legal uncertainty surrounding the tariffs, with a Supreme Court ruling potentially complicating reimposition efforts. Overall, Morgan Stanley remains optimistic about European defense stocks and expects continued diversification flows into the region’s equities.