Since taking office, the new U.S. president has introduced numerous measures at a dizzying pace, leaving little time for analysis before the next decision is announced. While it appears that Trump is making progress in negotiations with Mexico and Canada, as suggested by a 30-day pause, the situation with China has escalated into a full-blown trade war. The details of this trade war include the U.S. imposing a 10% tariff on Chinese imports, effective early February, with China retaliating by imposing a 15% tariff on certain types of coal and liquefied natural gas from the U.S., as well as a 10% tariff on crude oil, agricultural machinery, pickup trucks, and small commercial vehicles, along with additional export restrictions on precious metals and specific American companies.
A more pressing question for Europe is whether the U.S. will impose tariffs on EU goods. This issue stems from America's trade deficit with the EU, meaning that while Europe runs a surplus with the U.S., America imports more from than it exports to the continent.
Having won re-election, Trump has repeatedly criticized Europe's trade practices, particularly in the automobile and agricultural sectors, calling them unfair. While no concrete measures have been announced yet, he previously suggested imposing a 10-20% general tariff on all EU imports.
Many view Trump's tariff threats as mere negotiation tactics, raising concerns about everything from skyrocketing consumer prices to an all-out global trade war. However, when looking at the numbers, the situation isn't as 'catastrophic' as some suggest. The actual tariff rates between the two regions are not dramatically different. The average tariff on U.S. goods entering the EU is 3.95%, while the average tariff on EU goods entering the U.S. is 3.5%.
However, these are just averages—when looking at specific sectors, the spread in disparities is evident. Surprisingly, Trump's concerns about auto, agriculture, and food tariffs are not entirely unfounded. For instance, the EU imposes a 10% tariff on imported U.S. cars, while the U.S. only imposes 2.5% on imported EU cars. With such imbalances, the EU has good reason to be concerned and should prepare for tough negotiations on the issue of tariffs.
Despite the looming threat, the EU is not doomed yet on the tariffs issue. Many European exports to the U.S. include strategic goods, meaning: these products have limited global supply and cannot be easily replaced.
This is especially true for chemical and pharmaceutical products, which are crucial to U.S. industries. At the same time, the EU heavily relies on U.S. energy imports and has signaled a willingness to purchase more American weapons and defense equipment.
