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, in response to 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 compounds 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 could be “unsustainable”, significantly for uncovered sectors the place the US was a key market.
Financial modelling performed 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 general macroeconomic impact, though will probably be massive in some nations, like Eire, [which] are extra reliant on exports to the EU,” mentioned Demertzis. By way of sectors, “the consequences can be very massive certainly”, she added.
Pharmaceutical items
Medicines have been essentially the most exported items from the EU to the US in 2024, with nearly €80bn medication bought into the US market, in response to Eurostat.
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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] business on either side of the Atlantic,” she mentioned.
Thus far, prescribed 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 firms reminiscent of 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, significantly in Eire, the place they’ve taken benefit of a decrease tax fee.
Trump has complained that Eire has “bought your complete US pharmaceutical business in its grasp”. “We don’t make our personal medication, our personal prescribed drugs any extra,” he mentioned. “The drug firms are in Eire and they’re in a number 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 world wide. The US airplane maker, which sources elements for its planes from nations reminiscent of 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 might delay deliveries of plane if tariffs made them dearer.
Michael O’Leary, Ryanair chief govt, 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 govt, instructed an viewers in London that “no person desires to pay for tariffs”.
Autos
Automotive 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 come back to the negotiating desk with nice urgency,” mentioned Lynn Calder, chief govt of off-roader producer Ineos Automotive, which makes its autos in France.
“Each different area on the earth is mobilising, the place is Europe? Their ‘do nothing’ technique is failing.”
The automobile business had been hopeful in latest weeks that Brussels and Washington would attain an settlement on automobile 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 automobile imports whereas the US solely fees 2.5 per cent.
“I don’t suppose the US authorities is keen on closing down commerce between Europe and the US,” Volvo Vehicles chief govt Håkan Samuelsson instructed 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 international vehicles 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 automobile imports, or instead of them. Duties in extra of 25 per cent would make automobile exports unviable for European producers.
Greater tariffs would hit carmakers reminiscent of Audi and Porsche with no manufacturing footprint within the US, as nicely Volvo Vehicles, Mercedes-Benz and others that export autos bought 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 yr, valued at €38.9bn. It imported simply 169,152 new autos from the US, value €7.8 billion, in response to European automobile business physique Acea.
