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 compounds and different items.
The US is the EU’s largest single commerce companion, 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 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 impression 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 had been imposed, Demertzis added.
“It’s still a relatively small overall macroeconomic effect, although it will be large in some countries, like Ireland, [which] are more reliant on exports to the EU,” mentioned Demertzis. When it comes to sectors, “the effects will be very big indeed”, she added.
Pharmaceutical items
Medicines had been essentially the most exported items from the EU to the US in 2024, with nearly €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 concerned” 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 costs”. “Tariffs on medicines would be nothing short of a disaster for patients and [the] industry on both sides of the Atlantic,” she mentioned.
Up to now, prescribed drugs have been excluded from the so-called reciprocal tariffs launched at 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 corresponding 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, significantly in Eire, the place they’ve taken benefit of a decrease tax price.
Trump has complained that Eire has “got the entire US pharmaceutical industry in its grasp”. “We don’t make our own drugs, our own pharmaceuticals any more,” he mentioned. “The drug companies are in Ireland and they are in lots of other places — China.”
Aerospace
Aerospace business executives had already warned of upper prices because 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 all over the world. The US airplane maker, which sources elements for its planes from nations corresponding 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 prospects — had warned it may 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 aspect would decide up tariff prices.
Talking on Friday earlier than information of the tariffs broke, Guillaume Faury, Airbus chief government, informed an viewers in London that “nobody wants to pay for tariffs”.
Autos
Automobile executives instantly lashed out on the failure of the EU to succeed in 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 becoming more hated than China, which is mind-boggling. The EU needs to come to the negotiating table with great urgency,” mentioned Lynn Calder, chief government of off-roader producer Ineos Automotive, which makes its autos in France.
“Every other region in the world is mobilising, where is Europe? Their ‘do nothing’ strategy is failing.”
The automotive business 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 price.
The EU at present imposes a ten per cent tariff on US automotive imports whereas the US solely prices 2.5 per cent.
“I don’t think the US government is interested in closing down trade between Europe and the US,” Volvo Automobiles chief government Håkan Samuelsson informed the FT’s Way forward for the Automobile summit final week, saying the EU ought to “level” 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 international automobiles 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 rather than them. Duties in extra of 25 per cent would make automotive exports unviable for European producers.
Increased tariffs would hit carmakers corresponding 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 yr, valued at €38.9bn. It imported simply 169,152 new autos from the US, value €7.8 billion, in keeping with European automotive business physique Acea.
