Geopolitical supply disruptions discourage investment more strongly than US tariffs, according to the European Investment Bank

European firms are more willing to reduce their investments when presented with scenarios involving more frequent geopolitical disruptions to supply than with scenarios involving higher US tariffs, according to an experiment by the European Investment Bank (EIB). The exercise, conducted in 2025 with approximately 710 EU companies, also identifies an asymmetric response. Improving conditions stimulates investment intentions much less than worsening conditions discourages them.

In brief

In the scenario involving much more frequent geopolitical disruptions, the indicator comparing intentions to increase and reduce investment falls by 7.9 percentage points compared with the situation without changes. For much higher US tariffs, the decline is 2.7 points.

A strong improvement in geopolitical conditions produces an improvement of only 0.2 percentage points in the same indicator. Much lower tariffs generate a positive response of 1.6 points, smaller than the negative reaction to their increase.

Exporters and small and medium-sized enterprises react more strongly than average to geopolitical disruptions to supply. However, the results do not establish that these risks are the main obstacle to investment, since the scenario involving much more expensive financing produces an even larger negative reaction.

Participants assessed eight hypothetical situations each, and the responses were collected between April and July 2025. The percentages describe stated intentions in the experiment, not already recorded declines in the value of investments.

The experiment asked firms to consider the investment projects they were planning and say how they would modify them under different conditions. Each company was randomly assigned eight situations from a set of 28, covering factors such as regulation, competition, financing costs, US tariffs and geopolitical events. The analysis included in the EIB report “Redesigning supply chains”, prepared in collaboration with the European Commission, focuses on tariffs and the security of supply of the goods necessary for firms’ activities.

For comparison, the researchers used as a benchmark the scenario in which conditions remain unchanged. The indicator is the balance between the share of firms that would invest more and that of firms that would invest less, with the latter category also including abandoning the project. Thus, the deterioration of 7.9 percentage points in the adverse geopolitical scenario describes a change in the balance of responses; it does not mean that the value of investments would fall by 7.9%.

The difference between the two types of risk also appears in the less severe scenarios. Geopolitical events that disrupt supply slightly more frequently reduce the balance of intentions by 6 percentage points relative to the benchmark, while slightly higher US tariffs reduce it by 1.7 points. Under the hypothetical conditions tested, firms therefore react more strongly to uncertainty about access to the resources necessary for their activities than to a worsening of tariff conditions.

Improving the situation does not produce an equally large response in the opposite direction. For slightly less frequent or much less frequent geopolitical disruptions, the balance improves by only 0.1 and 0.2 percentage points, respectively. Reducing US tariffs generates increases of 0.9 points in the moderate scenario and 1.6 points in the scenario with much lower tariffs. The authors interpret the difference as an indication that firms tend to maintain their planned investments when conditions stabilize or improve, but reduce them more readily when risks increase.

The response also differs according to companies’ profiles. In the scenario involving much more frequent geopolitical disruptions, the balance deteriorates by 9.2 percentage points among exporters and by 8.3 points for small and medium-sized enterprises, compared with 7.9 points for the entire sample. Exporters also react more strongly to much higher US tariffs, with a deterioration of 3.5 points, compared with 2.7 points among all participating firms.

The comparison does not place geopolitical risk above all other investment difficulties. The report states that a scenario involving much higher borrowing costs causes a stronger negative response than the tariff or supply shocks analyzed. Access to financing therefore remains a necessary element for interpreting the results, even though the analysis presented focuses on trade and geopolitics.

The online exercise took place between April and July 2025, in parallel with the EIB Investment Survey. The latter covers approximately 12,000 firms in the EU and 800 in the US, but the experiment’s results come from the group of approximately 710 participating European companies. The experimental data are unweighted and must be distinguished from the weighted indicators presented in other sections of the report.

The authors consider that reducing uncertainty, by itself, may not be sufficient to stimulate investment. However, the experiment shows stated responses to alternative situations, without tracking investments actually made after a shock occurs and after it disappears. The difference between negative and positive reactions cannot be converted into an estimate of permanent investment losses.

https://2eu.brussels/ro/news/perturbarile-geopolitice-ale-aprovizionarii-descurajeaza-investitiile-mai-puternic-decat-tarifele-americane-intr-un-experiment-al-bancii-europene-de-investitii