Donald Trump’s menace 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 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 embody greater than €200bn of equipment and autos, €160bn of chemical substances and €25bn of food and drinks.
Maria Demertzis, the top of the financial system technique centre on the Convention Board think-tank in Brussels, mentioned the impression of a 50 per cent tariff could 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 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 EU,” mentioned Demertzis. By way of sectors, “the results will likely be very massive certainly”, she added.
Pharmaceutical items
Medicines had been essentially the most exported items from the EU to the US in 2024, with nearly €80bn medicine offered into the US market, based on 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 could be nothing wanting a catastrophe for sufferers and [the] trade on each side of the Atlantic,” she mentioned.
Up to now, prescribed drugs have been excluded from the so-called reciprocal tariffs launched at first of April, although Trump has launched a Part 232 probe into the nationwide safety implications of counting on overseas manufacturing. This might result in tariffs on the sector.
European pharmaceutical corporations 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 corporations have additionally constructed massive manufacturing bases within the EU, significantly in Eire, the place they’ve taken benefit of a decrease tax fee.
Trump has complained that Eire has “acquired the whole US pharmaceutical trade in its grasp”. “We don’t make our personal medicine, our personal prescribed drugs any extra,” he mentioned. “The drug corporations are in Eire and they’re in a number of different locations — China.”
Aerospace
Aerospace trade executives had already warned of upper prices because of Trump’s baseline 10 per cent tariff on nearly 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 varied areas world wide. The US airplane maker, which sources elements for its planes from international locations similar 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 considered one of Boeing’s greatest clients — had warned it may delay deliveries of plane if tariffs made them costlier.
Michael O’Leary, Ryanair chief government, mentioned 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 government, instructed an viewers in London that “no person needs to pay for tariffs”.
Autos
Automobile executives instantly lashed out on the failure of the EU to achieve a take care of the US to decrease the 25 per cent tariffs it has imposed on foreign-made autos 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 autos in France.
“Each different area on the 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 take care of the UK for a ten per cent tariff fee.
The EU presently imposes a ten per cent tariff on US automotive imports whereas the US solely fees 2.5 per cent.
“I don’t assume the US authorities is taken with closing down commerce between Europe and the US,” Volvo Automobiles chief government Håkan Samuelsson instructed the FT’s Way forward for the Automobile summit final week, saying the EU ought to “stage” the tariffs to the identical stage because the US.
Oliver Zipse, BMW’s chief government, additionally predicted earlier this month that Trump’s tariffs on overseas vehicles could be lowered from July.
It’s unclear whether or not Trump’s proposed 50 per cent tariffs could 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.
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 autos offered within the US from Europe.
The US is the second-largest marketplace for exports of EU autos after the UK. The EU exported 757,654 new autos to the US final 12 months, valued at €38.9bn. It imported simply 169,152 new autos from the US, value €7.8 billion, based on European automotive trade physique Acea.
