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 substances and different items.
The US is the EU’s largest single commerce associate, accounting for simply over 20 per cent of products exports value greater than €530bn in 2024, in keeping with figures from the European Fee.
Germany, Eire, Italy and France are the main exporters by nation. This embrace greater than €200bn of equipment and automobiles, €160bn of chemical substances and €25bn of foods and drinks.
Maria Demertzis, the pinnacle of the financial system technique centre on the Convention Board think-tank in Brussels, mentioned the affect of a 50 per cent tariff can be “unsustainable”, significantly for uncovered sectors the place the US was a key market.
Financial modelling carried out 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 have been imposed, Demertzis added.
“It’s nonetheless a comparatively small total macroeconomic impact, though it will likely be massive in some international locations, like Eire, [which] are extra reliant on exports to the EU,” mentioned Demertzis. When it comes to sectors, “the consequences will probably be very huge certainly”, she added.
Pharmaceutical items
Medicines have been essentially the most exported items from the EU to the US in 2024, with virtually €80bn medication offered into the US market, in keeping with Eurostat.
Nathalie Moll, director-general of the European Federation of Pharmaceutical Industries and Associations, mentioned 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] trade on each side of the Atlantic,” she mentioned.
To date, 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 corporations akin to Novo Nordisk, the Danish maker of weight problems and diabetes drug Ozempic, and Sanofi, the French drugmaker, have vital home manufacturing. However US pharmaceutical corporations have additionally constructed massive manufacturing bases within the EU, significantly in Eire, the place they’ve taken benefit of a decrease tax price.
Trump has complained that Eire has “received all the US pharmaceutical trade in its grasp”. “We don’t make our personal medication, our personal prescription drugs any extra,” he mentioned. “The drug corporations are in Eire and they’re in a lot of different locations — China.”
Aerospace
Aerospace trade executives had already warned of upper prices on account of Trump’s baseline 10 per cent tariff on virtually all international locations. The trade has since been lobbying the White Home, arguing for a return to the tariff-free period that was largely been the established order since 1979.
Each Boeing and Airbus import elements for brand spanking new plane from numerous areas all over the world. The US airplane maker, which sources elements for its planes from international locations akin to Italy and Japan, is seen as significantly 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 might delay deliveries of plane if tariffs made them dearer.
Michael O’Leary, Ryanair chief government, mentioned this month that the airline was locked in a “debate” with Boeing over which facet would decide up tariff prices.
Talking on Friday earlier than information of the tariffs broke, Guillaume Faury, Airbus chief government, advised an viewers in London that “no one needs to pay for tariffs”.
Autos
Automotive executives instantly lashed out on the failure of the EU to achieve a cope with the US to decrease the 25 per cent tariffs it has imposed on foreign-made automobiles and elements.
“The EU is turning into extra hated than China, which is mind-boggling. The EU wants to return to the negotiating desk with nice urgency,” mentioned Lynn Calder, chief government 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 automotive trade had been hopeful in current weeks that Brussels and Washington would attain an settlement on automotive imports, particularly after US reached a cope with the UK for a ten per cent tariff price.
The EU presently imposes a ten per cent tariff on US automotive imports whereas the US solely costs 2.5 per cent.
“I don’t suppose the US authorities is thinking about closing down commerce between Europe and the US,” Volvo Automobiles chief government Håkan Samuelsson advised the FT’s Way forward for the Automotive summit final week, saying the EU ought to “degree” the tariffs to the identical degree because the US.
Oliver Zipse, BMW’s chief government, 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 prevailing 25 per cent duties on automotive imports, or instead of them. Duties in extra of 25 per cent would make automotive exports unviable for European producers.
Larger tariffs would hit carmakers akin to Audi and Porsche with no manufacturing footprint within the US, as properly Volvo Automobiles, Mercedes-Benz and others that export automobiles offered 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 yr, valued at €38.9bn. It imported simply 169,152 new automobiles from the US, value €7.8 billion, in keeping with European automotive trade physique Acea.
