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Donald Trump improved global trade with his tariff announcement
What is fundamentally wrong is how Germany’s resigning prime minister, Olaf Scholz, explained the new Trump tariffs.
One-sided attack – that was the view of Spanish Prime Minister Pedro Sanchez.
French President Emmanuel Macron has certainly called them brutal, unfounded and “a major impact” on the European economy.
He convened an emergency meeting with representatives of French companies affected by 20% of tariffs on EU goods sold to the US, and issued a warning to European businesses that “will not invest in America until we make things clear.”
“What message would you send to major European players by investing billions of euros into the American economy? [the US] He said.
For France it is the wine, champagne and aviation industry, for Germany it is a car, and for Italy it is a luxury item. These sectors are well known to be sold overseas and are now at risk of being hit by US import taxes.
Overall, the EU’s chemicals, machinery and equipment industry is considered the most vulnerable to tariffs.
But if we dig a little deeper, there are other EU sectors that rely on the US market.
French cognac, generally dismissed as an elderly tipple in Europe, is a liquor of choice for many American rappers, playing a key role in the music and lifestyle of stars such as Jay-Z, 50 Cent and Snoop Dogg. Over 40% of French brandy is exported to the US.
Spain exports many gas turbines to the US, along with a large amount of olive oil.
Which EU countries are most exposed?
When you see EU countries being most exposed to the US in terms of GDP, the photos aren’t something you might imagine either.
Ireland relies heavily on the US in terms of goods and services. These exports – the pharmaceutical industry (currently exempts 20% tariffs until the US boosts its own production) and many exports related to technology make up the fifth of Ireland’s GDP.
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French cognac also faces US tariffs
Cyprus, Luxembourg and Malta are exposed more than the EU average in terms of service exports.
Belgium, the Netherlands and Slovakia are in a similar position when it comes to products.
Germany is exposed to the US more than 5% of its GDP than other major EU economies, followed by Italy (about 4%), France (3%) and Spain (over 2%). These figures were collated in 2024 by Kaisabank’s study based on previous year’s Eurostat figures.
Will the EU retaliate?
The response to new US tariffs is being adjusted in Brussels’ EU HQ. The European Commission deals with all the comprehensive trade issues of the bloc’s members.
Chairman Ursula von der Reyen claims to hold “a lot of cards” including the strength of negotiations and the power to push back.
The US economy is strong. It accounts for 25% of global GDP.
However, the EU single market of 450 million people (the world’s largest single market) is very close at 22% of global GDP.
So yes, the EU can bite when it comes to retaliation against Donald Trump’s tariffs. Especially when BLOC targets US services like Big Tech, including platform X from Apple, Meta, Amazon, and even Elon Musk.
But it puts a new backlash from the Trump administration. And the EU wants to avoid improving its anti.
Taking into account politics as well as economics, the EU has less room for manipulation than you think.
With energy supplies, the EU is purchasing US liquefied natural gas (LNG) after withdrawing from Russian gas following a full-scale Ukraine invasion.
It is difficult to reduce or significantly tax these imports. It will have a severe impact on not only US industry but EU consumers, and will exacerbate already dire relations with the US.
Consider all the recent lines against defence spending and Ukraine. Aside from the economic hell the EU wants to avoid with new Trump tariffs, the Bullock really wants to avoid a trade war with a country that was truly a close friend of Europe.
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Europe and the US had deeper lines than defense spending and war in Ukraine
Therefore, the Brussels plan is: We hope that threatens fierce retaliation and that Donald Trump will persuade him to negotiate and that he will stage a U-turn with tariffs.
EU trade commissioner Maros Sefcovic said he was talking to his US counterpart on Friday. It’s the opening gambit. The EU will not rush to retaliate.
What can the EU offer the US in negotiations?
The Trump administration has ruled out countries negotiating ways to get out of new tariffs before moving to live this weekend. But then, what could the EU offer to persuade the US president to retreat?
Trump is insanely heated about the EU’s massive trade surplus. They sell far more products than they buy from the US. The surplus in 2024 was about $200 million (180 billion euros, $153 billion).
When it comes to services, that’s the opposite – the US sells far more EU than other ways. That’s why the EU believes that the main retaliatory leverage against the US is in services such as banks and big technology.
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Big Tech can focus on EU retaliation tariffs
To correct the imbalance in the goods, the EU can offer to purchase more LNG or more military equipment from the United States, following its pledge to do more for its own safety in Washington.
But it will break another EU promise – to wither the European military industry by trying to buy the EU when rearming EU countries. That’s something the US already opposes, so that’s difficult.
Brussels can also reduce direct and indirect tariffs on US goods. You could lose your US produce allocation.
It would be very unpleasant to adhere to another US question. It is to advancing highly trumped digital regulations aimed at limiting monopoly and limiting EU audio and content.
How bad can this be?
How will EU officials price the possibility of a collapse of the international trade system?
European companies are worried about a market that has also been hit by Trump’s tariffs and is flooded with cheap goods in non-EU countries that are trying to sell elsewhere.
In China, the risks are very realistic. Trump is blaming Beijing with 50% tariffs when he adds everything.
Is the EU necessary to set up an import obligation on Chinese goods to protect itself, which could lead to an unintended trade war with China?
These are uncertain and extremely uncertain economic situations.
This is what the European Commission says would like to focus on issues that could be controlled if the EU capital agrees, which reduces internal barriers within the EU single market.
These barriers, such as tax systems, vary from country to country and affect the overall economic growth and competitiveness of the EU.
The IMF calculates it to be equivalent to 45% tariffs for EU manufacturing. 110% for service.
This is far higher than the tariffs currently imposed on the EU by Donald Trump.
EU countries say they are united in fighting them. So far, they have been split up by completing their own internal market.
