Every economist warned against it. The Wall Street Journal deemed it “idiotic.” The EU calls it “unnecessary and stupid”. Yet, in a move that has sent shockwaves through global markets, President Trump has announced its intention to impose increased tariffs on European Union imports. Following similar measures against China, Canada, and Mexico, the EU now finds itself in the crosshairs of America’s trade war on former partners. The only remaining questions on everyone’s mind are: “when?” and “how much?”

European manufacturers in the luxury, hospitality, and F&B sectors now face an impending storm that threatens to crash upon their shores with unprecedented force. This seismic shift will reverberate through industries spanning from exquisite textiles to gourmet delicacies, forcing companies to urgently rethink their market strategies and embark on a search for new opportunities.

Now, in Western belief, there’s a popular, albeit inaccurate, interpretation of the Chinese word for “crisis” as a combination of “danger” and “opportunity.” While linguistically flawed, this time this cliché might just be true.

As the American market appears to be closing its doors to European products, a silver lining emerges on the horizon. The burgeoning Saudi hospitality and agrifood market presents a potential counterbalance to the impact of increased U.S. tariffs. For European companies agile and innovative enough to seize these new opportunities, what initially seemed like a crisis could transform into a gateway for growth and expansion.

The Impact of Tariffs on European Exports

The implementation of a 25% tariff on European goods entering the U.S. market, as proposed by the Trump administration, stands to significantly alter the competitive landscape for European exporters. This increase from the current 2.5% rate would affect a wide array of products that are staples in the hospitality and luxury sectors. From exquisite French linens to Italian designer furniture, German precision kitchenware to Belgian chocolates, the cost of these goods in the American market is set to rise substantially.

The luxury goods sector, a cornerstone of European exports, is particularly vulnerable to these tariffs. With the global luxury goods market projected to reach $577.80 billion by 2029, European brands risk losing significant market share in the U.S., traditionally one of their strongest markets.

The food and beverage sector also stands to be heavily impacted. European gourmet products, from Italian olive oils to French wines, may see their competitive edge eroded in the U.S. market. This could lead to a reshaping of the $16.3 billion F&B market projected for Saudi Arabia in 2025, as European producers seek alternative markets for their products.

Pivoting to New Horizons: The Saudi Arabian Opportunity

As European manufacturers grapple with the challenges posed by U.S. tariffs, a promising alternative is emerging in the form of Saudi Arabia’s rapidly expanding hospitality and tourism sector. The Kingdom’s Vision 2030 initiative has set ambitious goals, aiming to attract 150 million tourists annually by 2030. This represents a significant increase from the 67.3 million hotel visitors recorded in 2021, signaling enormous growth potential for European exporters.

The Saudi hospitality market, valued at $48.6 billion in 2024, is projected to reach a staggering $109.6 billion by 2033, growing at a CAGR of 9.5%. This explosive growth presents a golden opportunity for European manufacturers to offset potential losses in the U.S. market.

Consider the luxury hotel sector in Saudi Arabia. The Kingdom plans to add 854,000 new rooms to its existing 400,000 by 2030. This massive expansion will require vast quantities of high-quality linens, tableware, furniture, and decorative items – all areas where European craftsmanship excels.

The Saudi food and beverage sector is equally promising. With sectoral revenues projected to reach $16.3 billion in 2025, there’s ample room for European gourmet products to gain a foothold. From French cheeses to Italian pasta, European F&B exports could find a receptive market among Saudi Arabia’s growing number of high-end restaurants and discerning consumers.

Moreover, Saudi Arabia’s focus on developing its luxury tourism offerings aligns perfectly with the expertise of European manufacturers. The Kingdom’s ultra-luxury projects, such as the Red Sea Development, Sindalah, New Murabba, Qiddiya, and Diriyah, demand the highest quality products and services – a demand that European luxury goods manufacturers are well-positioned to meet.

Adapting to the New Market

To successfully pivot to the Saudi Arabian market, European manufacturers will need to adapt their strategies. This may involve tailoring products to local tastes and regulations, establishing partnerships with Saudi businesses, and investing in marketing efforts to build brand awareness in the region.

But most of all, developing in the Saudi market will require European brands to have the right people on the ground, to find local distributors, to promote the products with clients, to boost the image and value of the brand locally, to navigate the local rules and regulations, to monitor local calls for tenders, new projects and opportunities, and, most importantly, to develop a local network, since personal relationships are vital to do business in the Kingdom.

Artemis Business Care is here to support you in your development in Saudi Arabia. For more information on the services that we offer to European exporters, please click here.