European ETFs in Spotlight Following Trump's Tariff Retreat at Davos

The global stock market witnessed quite an upheaval at the start of this week as U.S. President Donald Trump threatened a new wave of protectionist measures against European allies. The tension centered on the "Greenland row," with the U.S. administration threatening 10% to 25% across-the-board duties on eight European nations, with some reports flagging massive potential duties of up to 200% on French exports.  

However, the narrative took a dramatic turn yesterday at the World Economic Forum in Davos. Following a pivotal meeting with NATO Secretary-General Mark Rutte, President Trump retreated from his tariff remarks, announcing a "framework deal" for Arctic security that effectively eased the immediate threat of a transatlantic trade war.

This rapid de-escalation puts a direct spotlight on European Exchange-Traded Funds (ETFs). The threatened tariffs and the European Union's firm promise of a €93 billion retaliatory package created a clear danger to corporate earnings and economic growth on both sides of the Atlantic. The sudden removal of this immediate threat provides a powerful catalyst for a relief rally in European assets, making broad-based and sector-specific European ETFs a key area for investor consideration in the current climate.

A Collective Sigh of Relief for Transatlantic Equities

The retreat of the tariff threat provides a crucial breather for both European and U.S. stocks, averting what would have been a mutually detrimental economic conflict.

Resultantly, an immediate market rebound was witnessed. Following Trump's Davos announcement, the pan-European Stoxx 600 index gained nearly 1.2% yesterday. Major indices in the European Union (EU), such as the FTSE 100 (+0.74%) and France’s CAC 40 (+1.3%), also advanced.

On the other hand, the U.S.-centric S&P 500 Index ended Jan. 21 with a 1.2% gain, similar to the rally seen in the tech-heavy Nasdaq Composite index. This transatlantic rebound reversed prior session losses, witnessed on Jan. 20, 2026, at the bourses.

This recovery highlights that the underlying fundamentals of these companies, tethered across both sides of the Atlantic, remain strong once the "geopolitical tax" of trade uncertainty is removed.

European ETFs at the Current Focal Point

Amid the current situation, European ETFs offer the most efficient way to capture the present "relief rally" without the risk of individual stock picking. These ETFs provide exposure to a broad recovery in the Eurozone’s industrial and consumer sectors, which were disproportionately affected during the tariff scare, making them particularly attractive when a region-wide catalyst such as tariff removal is at play.

European ETFs in Spotlight

With Trump signaling a pause rather than escalation and consensus forecasts calling for modest earnings growth across major European indices in 2026, the following European ETFs emerge as strategic watchlist candidates for investors seeking renewed exposure to Europe while preserving liquidity and diversification.

SPDR EURO STOXX 50 ETF FEZ

This fund, with assets under management (AUM) worth $5.22 billion, provides exposure to 50 largest companies trading across Europe. Its top three holdings include ASML Holding (ASML (10.32%), SAP SE SAP (4.61%) and Siemens AG SIEGY (4.45%).

FEZ lost 1.9% over the last weekend but rose 1.1% on Jan. 21, 2026. The fund charges 29 basis points (bps) as fees.  

iShares MSCI Eurozone ETF EZU

This fund, with net assets worth $9.39 billion, provides exposure to 225 companies trading in developed market countries that use the euro as their official currency. Its top three holdings include ASML (6.96%), SAP (3.19%) and SIEGY (3.03%).

EZU lost 1.7% over the last weekend but rose 1.1% on Jan. 21, 2026. The fund charges 50 bps as fees.  

Vanguard FTSE Europe ETF VGK

This fund, with net assets worth $37.1 billion, provides exposure to 1,234 stocks issued by companies located in the major markets of Europe. Its top three holdings include ASML (2.81%), Roche Holding RHHBY (1.92%) and AstraZeneca AZN (1.84%). 

VGK lost 1.4% over the last weekend but rose 1% on Jan. 21, 2026. The fund charges 6 bps as fees.  

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