‘Turmoil’ as Trump’s 25% trade tariff edges closer for EU

Has US president Donald Trump got it right when he says the European Union comes off better in the two nations’ trading relationship? Technically, yes.

But it’s marginal and could be easily rectified through negotiation, rather than with the capacious 25% tax he continues to ominously hold over the bloc.

In short, total bilateral trade in goods between the EU and the US topped €851bn in 2023. The EU sent out €503bn and bought in €347bn from the US. That’s a surplus of €157bn benefitting the EU.

The tables are turned when it comes to services. The EU exported €319bn and imported €427bn from the States, leaving the latter €109bn better off.

Overall, the EU has a surplus of €48bn, by no means small change but a figure that could be worked at quite quickly with some sharp business acumen.

So, it’s little wonder financial analysts continue to hit their panic buttons when Trump’s tariffs appear to loom.

How hard would US tariffs rock the EU? Modelling by Bloomberg has suggested the taxes could wipe €28bn from the EU’s exports.

Figures from the Kiel Institute showed, if Trump’s 25% trade tariffs were imposed, EU exports to the States would plummet by up to 17%. The EU’s economy would contract by 0.4%.

However, the States’ economy would take a hit as well, shrinking by 0.17%.

Even worse for the US though, any tit-for-tat taxes from the EU would double the economic damage, pushing inflation up 1.5 percentage points, says the Kiel Institute.

Also read → Trump delays tariffs as shares slumpHowever, Trump, who perhaps has not looked at the data, sought advice from the experts or listened to anyone with an ounce of sense, believes the argument of caution is “soooo wrong”.

Tariffs on EU exports would drive more business into the States, particularly within car manufacture. But he’s also said on the record he expects his tariffs will drive more EU businesses to set up manufacturing facilities there.

The tariffs will be “very soon”, he said and they will be on “cars and all other things”, he warned.

Can Europe handle US trade tariffs? Is Europe prepared? Well, as much as possible. The European Commission has already tightened its trading relationship with Mexico and kicked trade deal talks with Malaysia out of the long grass.

In New Delhi this week, European Commission Ursula von der Leyen emphasised India’s and the bloc’s likenesses and the trading opportunities available to both nations.

She talked up the potential for strong economic cooperation, especially through trade and technology and improved market access.

European politicians have also started to talk less of catastrophe when it comes to the tariffs. Federation of German Wholesale, Foreign Trade and Services representative Antonin Finkelnburg said such a tax would create a “difficult” but not “impossible” situation, at least for Germany’s economy.

There should be worry, but not fear, he added.

But what about the UK? This week, Britain’s prime minister Sir Kier Starmer pushed hard to get Trump on side. The latter called Starmer a “very tough negotiator”, saying the prime minister was working hard to get out of any US tariffs.

At the end, Trump said there was a “very good chance” of a trade deal where “tariffs wouldn’t be necessary”.