How could Trump’s proposed 10% trade tariff affect EU exports to the US?

A possible tariff of the 10% on all assets of the European Union (EU) exported to USA (USA), a key proposal of donald trump in his 2024 re-election campaign, he could deeply affect at european industries driven by the export and disrupt their greater commercial relationship with abroad.

As EU exporters brace for potential hurdles, European Commission data underlines vulnerabilities economic issues at stake, with Germany, Italy and Ireland topping the list of most affected countries.

How crucial are EU exports to the United States?

Although China surpassed the US as the EU’s main goods partner in 2020, USA is still the Europe’s largest global trading partner If you include the services and the investment.

According to data from the European Commission, the European Union exported 502.3 billion euros in goods to the United States in 2023, which represents a fifth part of all non-EU exports.

Furthermore, the European Union it’s a net exporter of goods to the US., with a positive merchandise balance of about 158,000 million euros in 2023. The US market is especially vital for large European economies such as Germany, Italy and Ireland.

Only Germany represented 157.7 billion of euros in exports to the US in 2023. Italy and Ireland followed, with 67.3 billion euros and 51.6 billion euros in exports, respectively.

Which European sectors are most at risk?

European exports to the US are led by machinery and vehicles (207.6 billion euros), chemicals (137.4 billion euros) and other manufactured products (103.7 billion euros), which together represent almost the 90% of the bloc’s transatlantic exports.

According to the European Commission, these sectors were responsible for a significant trade surplus in 2023, with 102,000 million euros in machinery and vehicles and 58,000 million in chemical products.

Breaking down the export categories, the medicinal and pharmaceutical products They took the lead in 2023, with 55.6 billion euros, followed by the motor vehicleswith 40.7 billion, and the medicationswith 36.1 billion.

Germany and Italyas the main European producers of machinery and vehicles, face a particular risk. Automobile exports, a critical segment of the German economy, could see a drop in US demand due to rising prices, further weakening an already stagnant sector and putting jobs at risk.

If a 10% tariff is imposed, these industries face a possible loss of competitiveness due to an increase in final costs, with the risk of production slowdowns and job cuts if American consumers turn to other markets for these goods.

For European industries, the threat of US tariffs comes at a moment of tension economic, as the bloc’s manufacturing output has steadily declined over the past two years.

What impact would tariffs have on the EU-US trade balance?

Following the Russian invasion of Ukraine and the withdrawal of the European Union (EU) from Russian energy, USA has become a essential supplier of oil and natural gas, which has caused a growing trade deficit in energy imports.

This change created a deficit of energy goods of 70,000 million euros in 2023and a tariff 10% on EU exports probably would further exacerbate this imbalance, reducing the global trade surplus with the US and affecting economic growth within the bloc.

This effect would probably be exacerbated if the dollar strengthened significantly against the euro as a result of trade tariffs. In addition to the goods, the service trade of the European Union with the United States is also in a vulnerable position.

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According to the European Commission, the European Union recorded a deficit of 104 billion euros in services with the US in 2023, a gap what has increased every year from 2021. Although the services sector is likely to suffer a less direct impact than goods in a tariff regime, any retaliatory measures or escalation of trade barriers could disrupt sectors such as financehe tourism and the professional serviceswhich are fundamental for the EU’s service-oriented economies.

Could European countries retaliate?

If Trump goes ahead with the proposed tariff, the European Commission could consider a series of countermeasures to protect European exporters. Possible responses include tariffs reprisal on American goods or diversifying trade associations to reduce dependence on the American market.

However, European leaders are cautious against actions that could worsen the situation and disrupt economic ties well established between both economies. Retaliation or escalation of tariffs could lead to a slowdown in production in key export sectors, pushing some European countries to prioritize resilience by exploring new trade relationships in Asia or expanding intra-European demand for their exports.