The escalating trade war triggered by U.S. President Donald Trump’s sweeping tariffs is sending shockwaves across industries, with businesses from automakers to steel producers and consumer goods firms struggling to navigate the uncertainty. The latest round of tariffs, including a 25% levy on all U.S. steel and aluminum imports that took effect on Wednesday, has intensified global trade tensions, with Canada and Europe swiftly retaliating.

As trade barriers mount, industries reliant on international supply chains are facing rising costs and operational disruptions. German sportswear company Puma and Spanish fashion retailer Inditex, the owner of Zara, have both flagged concerns about declining U.S. consumer sentiment due to economic uncertainty. Puma’s stock plunged nearly 25% after warning of trade-related challenges and announcing job cuts.

Europe’s materials sector has emerged as the biggest underperformer this earnings season, with little sign of improvement in the near future. Companies supplying essential industrial products like plastics, aluminum, and paper have been hit hardest, as earnings reports show widespread misses. More than 65% of companies in the MSCI Europe materials index failed to meet earnings per share estimates for the fourth quarter, significantly worse than the 35% miss rate for the broader index.

The downturn in the sector is largely driven by weak demand from China, where economic struggles have dampened construction activity, and concerns over potential U.S. tariffs. These pressures have forced materials companies to rely on cost-cutting and productivity improvements to maintain profit margins—an increasingly difficult task given rising raw material prices and labor costs.

China’s consumer prices fell at their sharpest pace in 13 months in February, underscoring persistent deflationary pressures as weak domestic demand and an escalating trade war with the United States weigh on the world’s second-largest economy. The consumer price index (CPI) dropped 0.7% year-on-year, reversing January’s 0.5% increase and marking the first contraction since January 2024, according to data from the National Bureau of Statistics (NBS).

Core CPI, which excludes volatile food and fuel prices, slipped 0.1%, the first decline since January 2021, while food prices fell 3.3%, largely due to seasonal factors related to the timing of the Lunar New Year. The February CPI decline follows a period of heightened spending in January, when the holiday boosted demand for food and travel services. Month-on-month, CPI fell 0.2%, below expectations for a 0.1% drop.