
US tariffs on European goods threaten to shake up the world's largest 2-way trade relationship
Trump imposed a 20% import tax on all EU-made products in early April as part of a set of tariffs targeting countries with which the United States has a trade imbalance. Hours after the nation-specific duties took effect, he put them on hold until July 9 at a standard rate of 10% to quiet financial markets and allow time for negotiations.
Expressing displeasure the EU's stance in trade talks, however, the president said he would jack up the tariff rate for European exports to 50%. A rate that high could make everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals much more expensive in the U.S.
The EU, whose 27 member nations operate as a single economic bloc, said its leaders hoped to strike a deal with the Trump administration. Without one, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and auto parts to beer and Boeing airplanes.
Here are important things to know about trade between the United States and the European Union.
US-EU trade is enormous
A lot of money is at stake in the trade talks.
The EU's executive commission describes the trade between the U.S. and the EU as "the most important commercial relationship in the world.' The value of EU-U.S. trade in goods and services amounted to 1.7 trillion euros ($2 trillion) in 2024, or an average of 4.6 billion euros a day, according to EU statistics agency Eurostat.
The biggest U.S. export to Europe is crude oil, followed by pharmaceuticals, aircraft, automobiles, and medical and diagnostic equipment. Europe's biggest exports to the U.S. are pharmaceuticals, cars, aircraft, chemicals, medical instruments, and wine and spirits.
EU sells more to the US than vice versa
Trump has complained about the EU's 198 billion-euro ($233 billion) trade surplus in goods, which shows Americans buy more stuff from European businesses than the other way around. However, American companies fill some of the gap by outselling the EU when it comes to services such as cloud computing, travel bookings, and legal and financial services.
The U.S. services surplus took the nation's trade deficit with the EU down to 50 billion euros ($59 billion), which represents less than 3% of overall U.S.-EU trade.
What are the issues dividing the two sides?
Before Trump returned to office, the U.S. and the EU maintained a generally cooperative trade relationship and low tariff levels on both sides. The U.S. rate averaged 1.47% for European goods, while the EU's averaged 1.35% for American products.
But the White House has taken a much less friendly posture toward the longstanding U.S. ally since February. Along with the fluctuating tariff rate on European goods Trump has floated, the EU has been subject to his administration's 50% tariff on steel and aluminum and a 25% tax on imported automobiles and parts.
Trump administration officials have raised a slew of issues they want to see addressed, including agricultural barriers such as EU health regulations that include bans on chlorine-washed chicken and hormone-treated beef.
Trump has also criticized Europe's value-added taxes, which EU countries levy at the point of sale this year at rates of 17% to 27%. But many economists see VAT as trade-neutral since they apply to domestic goods and services as well as imported ones. Because national governments set the taxes through legislation, the EU has said they aren't on the table during trade negotiations.
'On the thorny issues of regulations, consumer standards and taxes, the EU and its member states cannot give much ground,' Holger Schmieding, chief economist at Germany's Berenberg bank, said. 'They cannot change the way they run the EU's vast internal market according to U.S. demands, which are often rooted in a faulty understanding of how the EU works.'
What are potential impacts of higher tariffs?
Economists and companies say higher tariffs will mean higher prices for U.S. consumers on imported goods. Importers must decide how much of the extra tax costs to absorb through lower profits and how much to pass on to customers.
Mercedes-Benz dealers in the US. have said they are holding the line on 2025 model year prices 'until further notice.' The German automaker has a partial tariff shield because it makes 35% of the Mercedes-Benz vehicles sold in the U.S. in Tuscaloosa, Alabama, but the company said it expects prices to undergo 'significant increases' in coming years.
Simon Hunt, CEO of Italian wine and spirits producer Campari Group, told investment analysts that prices could increase for some products or stay the same depending what rival companies do. If competitors raise prices, the company might decide to hold its prices on Skyy vodka or Aperol aperitif to gain market share, Hunt said.
Trump has argued that making it more difficult for foreign companies to sell in the U.S. is a way to stimulate a revival of American manufacturing. Many companies have dismissed the idea or said it would take years to yield positive economic benefits. However, some corporations have proved willing to shift some production stateside.
France-based luxury group LVMH, whose brands include Tiffany & Co., Luis Vuitton, Christian Dior and Moet & Chandon, could move some production to the United States, billionaire CEO Bernaud Arnault said at the company's annual meeting in April.
Arnault, who attended Trump's inauguration, has urged Europe to reach a deal based on reciprocal concessions.
'If we end up with high tariffs, ... we will be forced to increase our U.S.-based production to avoid tariffs,' Arnault said. 'And if Europe fails to negotiate intelligently, that will be the consequence for many companies. ... It will be the fault of Brussels, if it comes to that.'
Many expect Trump to drop his most drastic demands
Some forecasts indicate the U.S. economy would be more at risk if the negotiations fail. Without a deal, the EU would lose 0.3% of its gross domestic product and U.S. GDP would fall 0.7%, if Trump slaps imported goods from Europe with tariffs of 10% to 25%, according to a research review by Bruegel, a think tank in Brussels.
Given the complexity of some of the issues, the two sides may arrive only at a framework deal before Wednesday's deadline. That would likely leave a 10% base tariff, as well as the auto, steel and aluminum tariffs in place until details of a formal trade agreement are ironed out.
The most likely outcome of the trade talks is that 'the U.S. will agree to deals in which it takes back its worst threats of 'retaliatory' tariffs well beyond 10%,' Schmieding said. 'However, the road to get there could be rocky.'
The U.S. offering exemptions for some goods might smooth the path to a deal. The EU could offer to ease some regulations that the White House views as trade barriers.
'While Trump might be able to sell such an outcome as a 'win' for him, the ultimate victims of his protectionism would, of course, be mostly the U.S. consumers,' Schmieding said.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Bloomberg
7 minutes ago
- Bloomberg
UK Races to Get US to Cut Steel Tariffs Ahead of Key Deadline
The UK is racing to secure US agreement to make operational a deal to eliminate tariffs on British steel ahead of a Wednesday deadline when American officials could choose instead to raise the levy to 50%. Eliminating the tariffs is critical to an already struggling British steel industry, because the US is the second-biggest export destination for the alloy from the UK.


Bloomberg
7 minutes ago
- Bloomberg
Stellantis First-Half Auto Output Slid in Italy, Union Says
By Updated on Save Stellantis NV 's Italian car production cratered by a third in the first half and is poised to sink further this year from a multi-decade low set in 2024, an autoworkers' union warned. The company, which makes Fiat, Alfa Romeo and Jeep-branded models in Italy, produced 34% fewer passenger cars in the first six months of 2025, according to a report published Monday by FIM-CISL union. Commercial-vehicle production fell 16%.


Time Magazine
12 minutes ago
- Time Magazine
Trump's Tariff Threat to BRICS Over 'Anti-American' Concern
President Donald Trump has threatened additional tariffs on any country that supports the 'anti-American' policies of the BRICS group, a political and diplomatic coordination forum consisting of 11 countries. 'Any country aligning themselves with the anti-American policies of BRICS will be charged an additional 10% tariff. There will be no exceptions to this policy,' Trump said via Truth Social on Sunday night. Trump did not explicitly specify what constitutes 'anti-American' policies in this instance, but he has previously warned the group not to create a new BRICS currency or "back any other currency to replace the mighty U.S. dollar." The threat came after the U.S. President said that the long-awaited tariff deals and letters discussing those moves with other countries will be announced from 12pm ET on Monday, signalling movement on the trading front as the July 9 deadline for the pause on Trump's tariffs approaches. Thus far, Trump has only announced deals with three countries: the United Kingdom, China, and Vietnam. BRICS started its two-day 2025 summit in Brazil on Sunday. Leaders from attending countries signed a joint declaration titled 'Strengthening Global South Cooperation for More Inclusive and Sustainable Governance.' Unsurprisingly, come Monday, the threat of additional U.S. tariffs loomed over the intergovernmental organization's proceedings. Read More: The U.S. Has a Long History of Tariffs. Here's How Trump's Compare Here's what you need to know in light of Trump's remarks. What is BRICS? BRICS—which stands for Brazil, Russia, India, China, and South Africa—was founded in 2001, with the purpose of serving as a forum for emerging economies and less developed countries to cooperate on key issues such as trade, security, and diplomacy. Brazil, Russia, India, and China were original members, with South Africa invited to join in 2010. Since then, Saudi Arabia, Egypt, Iran, Ethiopia, the United Arab Emirates, and Indonesia have been welcomed aboard, bringing the total to 11 countries. The group also established a relationship with strategic partner countries at last year's summit, aligning itself with Belarus, Bolivia, Kazakhstan, Cuba, Malaysia, Thailand, Uganda, Uzbekistan and Nigeria. Vietnam was formerly announced as the 10th partner country in June. BRICS is widely seen as a challenge to the unipolar global power dynamic, in which the United States is regarded as the lead superpower. Instead, BRICS members have pushed a multipolar power setting, in which various countries lead global cooperation efforts. But some experts argue that the U.S. position as the standout superpower has come to an end and that the transition into a multipolar power is already underway. BRICS says it is responsible for 24% of the world's commercial exchanges and represents 39% of global Gross Domestic Product (GDP). On the opening day of this year's summit, a joint declaration from BRICs leaders called out the 'indiscriminate rising of tariffs,' without directly referencing the U.S. or Trump. 'We voice serious concerns about the rise of unilateral tariff and non-tariff measures which distort trade and are inconsistent with WTO [World Trade Organization] rules,' claimed the declaration. BRICs nations also doubled down on how they want to shape future global power and trade. 'We want to emphasize the importance of the global south as a driver of positive change, especially amid significant international challenges—including escalating geopolitical tensions, economic slowdown, accelerated technological transformation, protectionist measures. and migration challenges,' the group said. Read More: Key Takeaways From the 2025 NATO Summit How have BRICS leaders responded to Trump's tariffs threat? Kremlin spokesperson Dmitry Peskov on Monday denied that BRICS works to undermine other countries. Peskov said the Kremlin was aware of Trump's latest tariff threat regarding 'anti-American policies.' 'We have indeed seen such statements by President Trump, but it is very important to note here that the uniqueness of a group like BRICS is that it is a group of countries that share common approaches and a common world view on how to cooperate based on their own interests,' said Peskov. 'And this cooperation within BRICS has never been, and will never be, directed against any third countries.' China's foreign ministry also reacted, saying it opposes tariffs being used as a tool in an effort to coerce others. The use of tariffs serves no one, spokesperson Mao Ning told reporters, according to Reuters. South Africa's trade ministry spokesperson Kaamil Alli is quoted as telling Reuters: "We still await formal communication from the U.S. in respect our trade deal, but our conversations remain constructive and fruitful. As we have communicated previously, we are not anti-American." Indonesia's coordinating minister of economic affairs, Airlangga Hartarto, is set to travel to the U.S. on Monday after the BRICS summit concludes in Brazil. Tariffs will almost certainly be at the forefront of discussions once they land. Trump has previously threatened BRICS with tariffs. In November, after winning the presidential election, he threatened a 100% tariff on BRICS nations should they 'move away' from the U.S. dollar. 'The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is over,' Trump warned. 'We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty U.S. dollar, or they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful U.S. economy.'