Donald Trump’s risk to impose a 50 per cent tariff on all exports from the EU would ship a hammer blow to key manufacturing sectors, together with autos, aerospace, chemical compounds and different items.
The US is the EU’s largest single commerce accomplice, accounting for simply over 20 per cent of products exports value greater than €530bn in 2024, based on figures from the European Fee.
Germany, Eire, Italy and France are the main exporters by nation. This contains greater than €200bn of equipment and automobiles, €160bn of chemical compounds and €25bn of food and drinks.
Maria Demertzis, the top of the economic system technique centre on the Convention Board think-tank in Brussels, stated the influence of a 50 per cent tariff can be “unsustainable”, notably for uncovered sectors the place the US was a key market.
Financial modelling performed when Trump imposed a 20 per cent tariff final April estimated that the tariffs would hit the bloc’s GDP by 0.2 per cent. This might develop to 0.5 per cent if 50 per cent tariffs had been imposed, Demertzis added.
“It’s nonetheless a comparatively small total macroeconomic impact, though it is going to be massive in some international locations, like Eire, [which] are extra reliant on exports to the US,” stated Demertzis. By way of sectors, “the consequences shall be very large certainly”, she added.
Pharmaceutical items
Medicines had been probably the most exported items from the EU to the US in 2024, with virtually €80bn medication bought into the US market, based on Eurostat.
Nathalie Moll, director-general of the European Federation of Pharmaceutical Industries and Associations, stated the group was “deeply involved” about elevated commerce tensions between Europe and the US.
She warned tariffs would create shortages of medicines and urged the US and the EU to keep away from them at “all prices”. “Tariffs on medicines can be nothing in need of a catastrophe for sufferers and [the] business on each side of the Atlantic,” she stated.
Thus far, prescription drugs have been excluded from the so-called reciprocal tariffs launched in the beginning of April, although Trump has launched a Part 232 probe into the nationwide safety implications of counting on international manufacturing. This might result in tariffs on the sector.
European pharmaceutical firms similar to Novo Nordisk, the Danish maker of weight problems and diabetes drug Ozempic, and Sanofi, the French drugmaker, have important home manufacturing. However US pharmaceutical firms have additionally constructed massive manufacturing bases within the EU, notably in Eire, the place they’ve taken benefit of a decrease tax price.
Trump has complained that Eire has “bought the whole US pharmaceutical business in its grasp”. “We don’t make our personal medication, our personal prescription drugs any extra,” he stated. “The drug firms are in Eire and they’re in a number of different locations — China.”
Aerospace
Aerospace business executives had already warned of upper prices on account of Trump’s baseline 10 per cent tariff on virtually all international locations. The business has since been lobbying the White Home, arguing for a return to the tariff-free period that has largely been the established order since 1979.
Each Boeing and Airbus import elements for brand spanking new plane from numerous areas around the globe. The US aircraft maker, which sources elements for its planes from international locations similar to Italy and Japan, is seen as notably uncovered to the Trump tariffs.
Even earlier than Friday’s announcement, Ryanair — Europe’s largest low-cost airline and one in every of Boeing’s largest prospects — had warned it may delay deliveries of plane if tariffs made them dearer.
Michael O’Leary, Ryanair chief govt, stated this month that the airline was locked in a “debate” with Boeing over which facet would choose up tariff prices.
Talking on Friday earlier than information of the tariffs broke, Guillaume Faury, Airbus chief govt, instructed an viewers in London that “no one desires to pay for tariffs”.
Autos
Automotive executives instantly lashed out on the failure of the EU to succeed in a cope with the US to decrease the 25 per cent tariffs it has imposed on foreign-made automobiles and elements.
“The EU is changing into extra hated than China, which is mind-boggling. The EU wants to come back to the negotiating desk with nice urgency,” stated Lynn Calder, chief govt of off-roader producer Ineos Automotive, which makes its automobiles in France.
“Each different area on this planet is mobilising, the place is Europe? Their ‘do nothing’ technique is failing.”
The automobile business had been hopeful in current weeks that Brussels and Washington would attain an settlement on automobile imports, particularly after US reached a cope with the UK for a ten per cent tariff price.
The EU at the moment imposes a ten per cent tariff on US automobile imports whereas the US solely prices 2.5 per cent.
“I don’t suppose the US authorities is occupied with closing down commerce between Europe and the US,” Volvo Automobiles chief govt Håkan Samuelsson instructed the FT’s Way forward for the Automotive summit final week, saying the EU ought to “stage” the tariffs to the identical stage because the US.
Oliver Zipse, BMW’s chief govt, additionally predicted earlier this month that Trump’s tariffs on international vehicles can be lowered from July.
It’s unclear whether or not Trump’s proposed 50 per cent tariffs can be along with the present 25 per cent duties on automobile imports, or instead of them. Duties in extra of 25 per cent would make automobile exports unviable for European producers.
Greater tariffs would hit carmakers similar to Audi and Porsche with no manufacturing footprint within the US, as nicely Volvo Automobiles, Mercedes-Benz and others that export automobiles bought within the US from Europe.
The US is the second-largest marketplace for exports of EU automobiles after the UK. The EU exported 757,654 new automobiles to the US final 12 months, valued at €38.9bn. It imported simply 169,152 new automobiles from the US, value €7.8 billion, based on European automobile business physique Acea.
Food and drinks
Though the EU’s €25bn food and drinks exports to the US are small in contrast with main industrial sectors, they’re loaded with political significance and prone to be the goal of retaliatory measures on each side.
The 2-way commerce in agrifood uncooked supplies, elements, and completed merchandise is valued at €40bn. Many US-produced nuts, fruit and greens are on the listing for potential retaliation by Brussels, whereas French champagne and Italian Parmigiano cheese are among the many European merchandise below risk from US countermeasures.
Dirk Jacobs, director-general of Meals Drink Europe, which represents the sector, referred to as for “de-escalation” to keep away from the business getting caught within the crossfire of a full-blown transatlantic commerce battle.
