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 embody 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 could be “unsustainable”, notably 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 is able to 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 will likely be massive in some nations, like Eire, [which] are extra reliant on exports to the EU,” stated Demertzis. When it comes to sectors, “the consequences will likely be very massive certainly”, she added.
Pharmaceutical items
Medicines had been probably the most exported items from the EU to the US in 2024, with nearly €80bn medication offered 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 could be nothing in need of a catastrophe for sufferers and [the] business on each side of the Atlantic,” she stated.
To this point, 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 firms equivalent 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 firms have additionally constructed massive manufacturing bases within the EU, notably in Eire, the place they’ve taken benefit of a decrease tax charge.
Trump has complained that Eire has “acquired the complete US pharmaceutical business in its grasp”. “We don’t make our personal medication, our personal prescribed drugs any extra,” he stated. “The drug firms are in Eire and they’re in a lot 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 nearly all nations. The business 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 new plane from varied areas around the globe. The US aircraft maker, which sources elements for its planes from nations equivalent 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 greatest clients — had warned it may delay deliveries of plane if tariffs made them costlier.
Michael O’Leary, Ryanair chief govt, stated this month that the airline was locked in a “debate” with Boeing over which aspect would decide up tariff prices.
Talking on Friday earlier than information of the tariffs broke, Guillaume Faury, Airbus chief govt, advised 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 turning 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 the planet is mobilising, the place is Europe? Their ‘do nothing’ technique is failing.”
The automotive business had been hopeful in latest 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 charge.
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 suppose the US authorities is fascinated about closing down commerce between Europe and the US,” Volvo Automobiles chief govt Håkan Samuelsson advised 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 overseas automobiles could be lowered from July.
It’s unclear whether or not Trump’s proposed 50 per cent tariffs could be along with the present 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 equivalent 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 12 months, valued at €38.9bn. It imported simply 169,152 new automobiles from the US, value €7.8 billion, based on European automotive business physique Acea.
