Trump threatens the EU with 50% tariffs: will there be a trade war?

Trump threatens the EU with 50% tariffs: will there be a trade war?

American President Donald Trump has threatened the EU with drastic tariffs of 50 percent, which could possibly come into force from June 1st. In a critical statement, Trump described the EU as a trade enemy of the US and cited a number of trade barriers, including powerful trade barriers, VAT, corporate penalties, as well as non-monetary trade barriers and currency manipulation. He also complained about unfair lawsuits against US companies. In response to these threats, Federal Foreign Minister Wadephul was critical and emphasized that tariffs would not help anyone but could damage economic development in both markets Deutschlandfunk reported.

In advance, Trump had already announced in April a 90-day break for certain tariffs on EU countries, which concerns punitive levies that are based on the countries' trade deficits. The EU, on the other hand, has also announced that it will suspend planned counter-tariffs on US products for 90 days. This temporary trade halt could soon end, however, as Trump threatened to impose 25 percent tariffs if a deal is not convinced. A deadline for a solution was originally set for July, but Trump rejected the EU's offer to reciprocate all tariffs on industrial goods.

EU resorts to counter tariffs

The EU states are meeting today to discuss their reaction to the threatened US tariffs. The EU Commission has presented a list of possible US goods on which import duties of up to 25 percent could be levied. These include agricultural products such as corn, soybeans and poultry, but also textiles and steel products. There is no crash for American bourbon whiskey because lobbying from France and Italy was effective. Nevertheless, Trump announced tariffs of up to 200 percent on wine, champagne and other alcoholic drinks from the EU, further inflaming tensions between the partners, as daily news reported.

The EU fears that its own companies could be damaged by these tariffs, but is aiming for a negotiated solution. The EU's countermeasures are expected to be less painful compared to US tariffs on steel and aluminum imports. Some tariffs could be due as early as mid-May, while others, such as those on almonds, are not due to take effect until December.

Trade imbalance and energy purchasing

In his argument, Trump cites a US trade deficit with the EU of $350 billion. The EU, on the other hand, documents a trade surplus of 157 billion euros (approx. 172 billion dollars) in goods for 2023. Trump has also demanded that the EU buy more American energy to compensate for the trade deficit. It is noteworthy that 50 percent of the liquefied natural gas (LNG) for the EU is already imported from the USA. However, the EU must be very careful to avoid excessive dependence on a single supplier.

Finally, it remains unclear whether the threatened punitive tariffs will actually come into force. Trump has often threatened high tariffs in the past, but has often changed his position. The outcome of these trade conflicts could have a significant impact on the economic relationship between the US and the EU and, beyond that, on the global economy as a whole.