Trump’s tariff threats cast shadow over key European industries

As Donald Trump prepares to return to the White House, Europe is bracing for sweeping US trade tariffs that could deal a blow to key industries. Trump’s proposal to impose 20% duties on all US imports—totaling over $3 trillion annually—has set off alarm bells in Brussels. European exports to the US, valued at more than $550 billion in 2024, could face severe disruption. The move mirrors Trump’s first-term trade policies. Projected to reach a record $230 billion in 2024, the US-EU trade deficit has fueled Trump’s push for protectionist policies. The growing imbalance is likely to bolster his case for tougher trade actions as he seeks to shore up US manufacturers and reduce reliance on foreign imports.

“European leaders should not assume these threats are just bluster,” said Everett Eissenstat, Trump’s former assistant for international economic affairs, in an interview with Politico newspaper. “The president has a track record of following through, and his team is being built with this agenda in mind.”

Autos, agriculture, and chemicals in the crosshairs

Trump’s trade agenda is expected to target sectors where the EU holds a strong surplus with the U.S., including automobiles, agriculture, and chemicals.

Germany’s automotive sector—home to global giants like Volkswagen, BMW, and Mercedes-Benz—is particularly vulnerable. The country recorded an €86 billion trade surplus with the US in 2023, making it a prime target for tariffs. The broader European auto industry, already grappling with rising energy costs and supply chain disruptions, could face a fresh wave of challenges.

The US also enjoys structural advantages in lower labor, capital, and energy costs. Those gaps have widened since late 2024, when U.S. sanctions on Russia’s Gazprombank disrupted payments for Europe’s remaining Russian gas imports, driving up energy prices across the continent.

European agriculture is also at risk. The EU recorded a surplus in agricultural trade with the U.S. in the first half of 2024, driven by exports of olive oil, wine, and brandy. However, these products are easier to replace in the U.S. market compared to complex machinery or industrial components, making them an attractive target for tariffs.

European farmers are already under pressure from rising fertilizer and fuel costs, weak 2024 harvests, and growing competition from low-cost producers such as Ukraine and Latin America.

Due to high fertilizer prices, EU farms have found themselves in a very difficult situation. In 2022, nitrogen fertilizer prices increased by 3.3 times compared to 2019, and in 2024, they were still 65% higher. Farmers began using less fertilizer. As a result, according to Eurostat, the total crop yield in the EU decreased by 27.5 million tons compared to 2019. All this has led to a reduction in farmers’ profits. In 2023, income per worker dropped by an average of 5.4%. Consequently, the number of people employed in the sector is decreasing by an average of 3.6% per year.

The EU’s recent free trade deal with Mercosur, which is expected to allow a flood of cheap agricultural imports into Europe, adds another layer of complexity for the bloc’s struggling agricultural sector.

Limited tools for retaliation

While Brussels has started preparing countermeasures, the EU faces significant structural challenges in responding to US tariffs. European manufacturers and farmers are at a competitive disadvantage, particularly as American producers benefit from lower input and energy costs.

Rather than retaliate with equivalent tariffs, EU policymakers may focus on reducing input costs for key industries. One potential measure involves cutting import duties on fertilizers from suppliers like Russia and Trinidad and Tobago, though such a move could face political resistance given the EU’s political stance on Russia.

There are occasional proposals to completely ban the import of fertilizers from Russia. It must be acknowledged that behind the outward appeal of this initiative lies an extremely ill-conceived idea. Such a restriction would benefit only a few specific companies that are already performing well in the market. However, it would deal yet another devastating blow to the entire agricultural sector of the EU.

Protective tariffs on products from Russia have already shown clear results, there is currently no surplus of Russian fertilizers on the EU market. According to a study by the analytical firm CRU Independent Expert Intelligence, imports of Russian nitrogen have now decreased to 28%, compared to its historical norm of 33%. The share of urea from Russia dropped from 33% to 23.8%. Meanwhile, 39% of potassium fertilizer imports to the EU come from Canada, while Russia’s share has decreased to 20%.

Another strategy could involve diversifying trade ties with Global South markets to offset losses in the U.S. “Matching the U.S. tariff-for-tariff would backfire, further increasing costs for European businesses and consumers,” said a senior EU trade official. “Europe needs a smarter, more targeted approach.”

High stakes for Europe

Trump’s tariff proposal comes at a challenging time for Europe, which is already grappling with an energy crisis, high inflation, and sluggish growth. A renewed trade war with the U.S. would add another layer of uncertainty to the economic outlook.

“Trump’s proposals are a stark reminder that the transatlantic relationship is no longer a given,” said a senior EU diplomat. “Europe needs to focus on its own competitiveness, or we risk losing ground not just to the US, but to other global players.”

The strength of the EU’s competitors lies in their almost instantaneous response to geopolitical changes, which they exploit to their maximum advantage. These global players swiftly fill newly opened niches, taking advantage of any weakness in their opponents and seizing their positions. This contrasts with the cumbersome EU, which is further hindered by its incredible inertia.

The example of sanctions against Russian fertilizers is particularly telling here. Virtually all global players, including the US, are benefiting from these sanctions, while the EU alone is counting massive losses. As Brussels prepares for a potential trade war with Washington, it must keep this in mind and act as rationally as possible right now, avoiding further escalation. At the very least, this is necessary to preserve its own agriculture, tens of thousands of farms, and, along with them, its food security.

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