Europe-Focused ETFs Rally Ahead of Tariff Deadline
- European ETFs posted strong gains despite a looming 30% US tariff threat.
- The defense sector leads with 80% year-to-date returns amid geopolitical tensions.
- Billions have flowed into Europe-focused funds as investors position for trade uncertainty.
U.S.-listed, Europe-focused ETFs are posting double-digit gains as investors pour billions into the funds ahead of an Aug. 1 deadline for 30% tariffs on European Union imports.
The Vanguard FTSE Europe ETF (VGK), the largest Europe equity fund with $26.2 billion in assets, has attracted $5.8 billion in net inflows year to date while returning 23.9%, according to FactSet data. The fund's performance nearly matched the 23.4% gain of the JPMorgan BetaBuilders Europe ETF (BBEU) and outpaced the 7.7% return of the SPDR S&P 500 ETF Trust (SPY).
The strong performance comes as Commerce Secretary Howard Lutnick warned over the weekend that the Aug. 1 deadline for baseline 30% tariffs on EU imports is fixed, creating uncertainty for European markets and the companies held by these exchange-traded funds, according to CNBC.
Europe-focused ETF flows demonstrate how investors are positioning portfolios ahead of potential trade disruptions, with some sectors seeing large gains as geopolitics shape markets.
EUAD Defense Fund Leads Europe ETF Gains
The defense sector is leading the charge as Europe boosts defense spending amid the Russia/Ukraine war and a push by the Trump Administration to do so. The Select STOXX Europe Aerospace & Defense ETF (EUAD) has surged 80.2% year to date, attracting $962.4 million in net flows, according to FactSet. The fund, managed by Tuttle Capital Management, tracks European companies that derive at least 50% of their revenue from aerospace and defense supply chains.
Financial sector exposure has also proven profitable for investors. The iShares MSCI Europe Financials ETF (EUFN) has returned just over 40% year to date while drawing $1.4 billion in net inflows, the data show. BlackRock Inc. (BLK) manages the $4 billion fund, which tracks financial stocks across developed European markets.
Smaller, specialized funds have seen mixed investor interest. The First Trust IPOX Europe Equity Opportunities ETF (FPXE), which tracks the 100 largest European initial public offerings, gained 24.7% year to date but attracted only $1.5 million in net flows, according to FactSet. The fund holds positions in companies during their first 1,000 trading days after going public.
Not all Europe-focused funds have benefited from the recent rally, however. The JPMorgan BetaBuilders Europe ETF (BBEU) experienced net outflows of $110.4 million year to date despite its 23.4% return, the data show. The $4.3 billion fund focuses on large- and mid-cap stocks in developed European countries.
Europe-Focused ETFs Comparison
Fund | |||||
Issuer | Vanguard | First Trust | BlackRock | Tuttle Capital Management | JPMorgan Chase |
AUM | $26.2B | $6.3M | $4B | $1.1B | $4.3B |
Expense Ratio | 0.06% | 0.7% | 0.48% | 0.5% | 0.09% |
One-Month Net Flows | $598.8M | $0 | $54.3M | $162.6M | -$260.3M |
One-Month Performance | 3.2% | 6% | 4.5% | 7.7% | 2.8% |
Year-to-Date Net Flows | $5.8B | $1.5M | $1.4B | $962.4M | -$110.4M |
Year-to-Date Performance | 23.9% | 24.7% | 40% | 80.2% | 23.4% |
Source: etf.com & FactSet Data as of July 21, 2025
Tariff Concerns Mount
The trade tensions have created a challenging environment for European companies and the funds that track them.
The EU had total trade with the U.S. worth 1.7 trillion euros in 2024, according to the European Council as reported by CNBC. The bloc ran a surplus of around 50 billion euros, including both goods and services, which has drawn criticism from U.S. officials.
