• Donald Trump has announced tariffs on products imported from Canada, Mexico and China.
• He promises to do the same with the European Union, but the details are not yet clear.
• For Europe, the United States is a hugely important market, especially for the manufacturing and automotive sectors.
• The concrete risk is that tariffs will trigger a rise in prices and a general slowdown of the economy.

Donald Trump, barely into his second term as president of the United States, imposes additional tariffs on products arriving from Canada, Mexico and China. Stock markets in turmoil, Trump partially walking back his position – while at the same time threatening to do the same to the European Union. Has a trade war broken out? Will there be repercussions for European citizens?

What Donald Trump has decided on tariffs

Let's start from the beginning. The term tariffs refers to taxes applied to goods imported from another country. They are the protectionist measure par excellence: if goods arriving from abroad cost more, it is inevitable that those produced locally become more competitive. Specifically, the term antidumping is used when a foreign country tries to capture international markets by artificially keeping the prices of certain goods low, and these taxes correct such distortions. But tariffs can also become a lever in international relations, when they are used to penalise countries considered to be acting unfairly.

The executive order signed by Donald Trump on 1 February argues precisely that China, Mexico and Canada have not done enough to stop illegal immigration and are complicit in the smuggling of fentanyl, a drug that has generated a health crisis of enormous proportions. It therefore imposes additional tariffs of 25 per cent on goods imported from Canada and Mexico and 10 per cent on Chinese goods. "Tariffs are a proven and powerful measure to protect the national interest," the executive order reads, noting that the US trade balance (i.e. the difference between goods imported and exported) is in deficit by more than one trillion dollars.

The decision rattled stock markets, including European ones, and prompted China to retaliate by imposing tariffs of 15 per cent on coal and liquefied natural gas arriving from the United States and 10 per cent on oil and other goods. Their entry into force is a matter of days away, but it appears that talks between Donald Trump and Xi Jinping are in the meantime being planned. Canada and Mexico, on the other hand, expressed their willingness to cooperate and were "rewarded" with a 30-day pause.

Peterson Institute ✓ @PIIE

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Canada & Mexico are the two largest trading partners of the US. Our new guide to the USMCA explains the trade agreement, what's at stake as President Trump threatens tariffs, & more. Stay tuned for updates as the situation develops.
piie.com/microsites/202…

♥ 17💬 2 31 gen 2025 · Apri su X →

Will Trump impose tariffs on goods arriving from the European Union too?

The matter certainly does not end there. Upon his arrival in Maryland on 5 February, Donald Trump confirmed to the BBC his intention to impose tariffs on products arriving from the European Union as well. "I wouldn't say there's a timetable, but it will happen fairly soon," he stated. Referring to Europeans, he said: "They don't take our cars, they don't take our agricultural products, they take almost nothing and we take everything from them. Millions of cars, enormous quantities of food and agricultural products." If it sees its commercial interests attacked, the European Union "will have to stand up for itself and therefore respond," French president Emmanuel Macron has already made clear. It is not clear whether similar measures against the United Kingdom are on the horizon: for now, relations between Trump and Prime Minister Keir Starmer appear relaxed.

How important is trade with the United States for the European Union

After China, the European Union boasts the largest trade surplus with the United States: in 2023 the difference between the value of goods exported and those imported exceeded 156 billion euros. This margin narrows, however, if services are also taken into account, for which the Union – again in 2023 – recorded a trade deficit of 108.6 billion euros. A decline in trade with the United States would therefore have significant consequences. Especially in those countries where it represents a considerable share of total exports, such as Ireland (25 per cent), Germany and Italy (both around 10 per cent). Without knowing the details, it is impossible to forecast the economic impact of the future tariffs imposed by Donald Trump: what is certain for now is that the Union exports primarily machinery, equipment, vehicles and components to the United States, with a total value of over 200 billion euros in 2023.

As the New York Times points out, a positive trade balance is not necessarily synonymous with a healthy economy. The last time the United States had one was in 1975, in the midst of a recession. Nor is a trade deficit necessarily the product of unfair policies: in many cases, it is simply due to the fact that the value for money of imported products proves more competitive. This is demonstrated by the fact that, overall, the tariffs that the European Union and the United States impose on each other are fairly similar. Some markets, however, are more sensitive than others. For cars imported from abroad, for example, the European Union imposes tariffs of 10 per cent, compared to the 2.5 per cent required by the United States.

A certain degree of concern is therefore spreading within the German automotive sector, already grappling with a deep crisis, which fears being hit twice: both by the future tariffs imposed on the European Union and by those already announced on Mexico. Of the 1.3 million vehicles sold by German carmakers in the United States last year, in fact, around one in four had been produced in Mexico, at plants built specifically to take advantage of the free trade agreement between the United States, Mexico and Canada signed during Trump's first term.

What are the prospects for the economy

In general terms, Trump argues that discouraging imports benefits US companies, with positive consequences in terms of revenues, job creation and therefore a fall in inflation. Typically, however, a country that imposes tariffs triggers a rise in prices in its own domestic market, because companies that buy from abroad find themselves facing higher costs and pass them on to end consumers.

Forbes ✓ @Forbes

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President Donald Trump's tariffs and trade policy changes are expected to drive price increases across an array of consumer goods.
Here's what could be impacted: forbes.com/sites/tylerrou…

♥ 36💬 19 5 feb 2025 · Apri su X →

It is therefore foreseeable that the United States – and the European Union along with it, should it choose to raise its own tariffs in turn – will face a rise in inflation. This, in turn, forces central banks to keep interest rates high: combined with a decline in exports, the inevitable consequence is a slowdown in economic growth. According to analysts at Deutsche Bank, the imposition of a flat 10 per cent tariff on European goods exported to the United States would be enough to reduce the continent's gross domestic product (GDP) by 0.5–0.9 per cent – effectively halving the growth forecast for 2025, currently estimated at 1.5 per cent.