President Trump's promise to strike U.S. trading partners, including unlimited tariffs, including penalties for taxes that unfairly impose on US imports, could hardly happen at bad times for the continent.
On Thursday, Trump signed a memo instructing teams to prepare foreign “mutual” tariffs by April, stating essentially the same level of tax on imports that those countries place on American goods. I did. The move threatens to disrupt the system of global trade established at the end of World War II.
The announcement comes as the economies of Europe, including the bloc's great powers, Germany and France, are struggling with the challenges of inactive growth, high energy costs and inflation caused by the war in Ukraine.
Europeans have already been upset from the US by overturning Ukrainian alliances, claiming it will control artificial intelligence.
“Within 24 hours, the Trump administration has made it clear to us a wide range of pivots from Europe, both in terms of NATO and in terms of trade,” said Barbara Matthews, a senior fellow at the Atlantic Council. “The economic impact of Europe may be substantial.”
What's worse, Trump has threw out an explosive complaint. VAT is a system used by over 140 countries to generate revenue through household and imported taxation. The economist said he could use his complaints as levers to promote tariffs that could potentially increase US imports.
This could raise prices for Americans on some of our beloved European imports, from Porsche sports cars and Novonordisk diabetes and weight loss pills to Gucci leather handbags and IKEA furniture.
But the European Union is expected to lose more from the fight. This could reduce economic growth in the coming years as trade with the US slows down and investment in Europe decreases. company. “The shock will be concentrated in 2025 and 2026, and the impact could be greater in countries with large manufacturing sectors with direct and indirect exposure to US trade,” they wrote in their research notes. I am writing.
Additionally, the higher the tariff, the more complicated the issue of the European Central Bank. This has steadily reduced interest rates since last summer to strengthen the region's debilitating economy. Central bank chairman Christine Lagarde warned last month that Trump's planned tariffs would “have a negative global impact.”
The tariff threat forces the European government into the corner as it tackles the rising debt and growing deficits.
The European Commission's administrative department of the Bullock called the proposal from Washington a “step in the wrong direction” and vowed to take action.
“The EU will respond firmly to unfair barriers to free and fair transactions, including when tariffs are used to challenge legal and non-discriminatory policies,” he said in a statement Friday. I did.
Trump is particularly aimed at Germany, the largest economy in Europe and the most unstable ground. It produced almost a quarter of the European Union's gross domestic product, and its trade surplus with the US expanded to a record $72 billion in 2024.
However, Germany has stuck to stagnation after two years of economic decline. Last month, the Berlin government reduced its 2025 growth forecast from 1.1% to 0.3%, with economists saying tariffs could further weaken a vulnerable economy.
Italy is particularly exposed to the US market, according to Conf Dindustria, the country's largest business association. After the European Union, the US is Italy's biggest export destination, and according to Italian consulting firm Prometeia, a 10% increase in tariffs on Italian products costs between 4 billion and 7 billion euros.
France is also facing a slower growth as it seeks to curb one of Europe's highest debt and deficits. The government recently passed the Belt emphasis budget. But executives from industries that are important to the French economy, including automobiles, medicines, wine and spirit, are worried that Trump's tariffs will be able to cut demand in one of the biggest export markets.
European industry has already been shaken by high energy costs and lower demand from consumers who are still feeling the stinging of inflation, which peaked at 10% in 2022, but have since fallen to 2.4% Masu. “They're making the most of the eurozone economist at ING Bank,” said Bert Collin, chief economist at ING Bank.
These risks increase when Trump argues that European VAT is similar to tariffs. This is the argument used to further increase the overall level of tariffs on US imports.
Holger Schmeading, chief economist at Belenberg Bank, charges 22% VAT on all products, compared to the average US sales tax of 7%. “The US may want to justify the difference between the two, 15% tariff on EU goods based on this,” he said. However, he added that doing so would be “more destructive.”
At risk are European automakers like Audi and Porsche, which export billions of dollars worth of cars to the US, and pharmaceutical companies like Novo Nordisk, which will turn popular weight loss drugs into Ozempic and Wegovy. is.
Lukasorca, a Chi-Flag Jury Goods Analyst at research firm Bernstein, said the rise in import operations would also hurt European luxury companies. They were able to use other strategies to offset some of the higher tariffs, but “the higher the increase in import obligation, the greater the problem,” he said.
The EU government can lower its own import duties to try to appease the US, but it is unlikely to hinder value-added taxes, resulting in nearly a fifth of total tax revenue.
However, such complexity does not seem to take into account Trump's arguments about the tariffs of the eye. Instead, he will focus on specific industries that show what is called the “unfair” nature of trade, analysts said.
The German auto industry in particular appears to be plaguing Trump. For many years, Trump has claimed that BMW, Mercedes-Benz and Volkswagen have placed “millions of cars” on the streets of the United States. However, in 2023, these three German automakers produced 900,000 vehicles in the US, creating 48,000 jobs.
Hildegard Müller, chairman of the German Automotive Industry Association, criticizes Trump's 10% obligation to import passenger cars in Europe compared to 2.5% in the US, but the US charges a much higher 25% import duties. He pointed out that he is doing so. The pickup truck is the best selling vehicle in the United States.
She urged the European Union to negotiate an agreement. “The EU must present a united, powerful front, and we must make it clear over and over that escalation only creates losers,” she said.
The scale and complexity of the Trump administration's tariff proposal means that countries and businesses will scramble to find solutions. His reaction to Canada and Mexico has shown that Trump is often willing to cut transactions, said Stephen Olson, a visiting senior fellow at the Iseas -Yusof Ishak Institute in Singapore. .
“Like everything about Trump, this policy can turn into a heartbeat,” Olson said. “Speed ​​and intense negotiations will undoubtedly take place between the implementation date.”
Eshe Nelson Report on contributions in London, Emmabu mullet Rome and Jeanna Smialek In Washington.
