It is often said that in trade conflicts, there are no winners. Consumers feel the impact in their wallets, and profit margins frequently come under pressure.
Nevertheless, the current President of the United States has expressed strong support for tariffs, calling them “one of the nicest words” he knows. Shortly after taking office, he organised what he called “Liberation Day” in the White House Rose Garden. On this occasion, he announced tariffs on nearly every country in the world. These tariffs are tied to the U.S. trade deficit: in other words, the greater a country’s trade surplus with the U.S., the higher the tariff it faces. For Europe, the President announced a 20% tariff. Within the EU, however, trade surpluses with the U.S. vary widely among Member States – some being more service-oriented, others more industrial and export-focused.
Following significant turbulence in global stock markets, the U.S. decided to temporarily pause the implementation of certain tariffs. However, a general tariff rate of 10% remains in place. Negotiations between the U.S. and the EU are now underway. Nonetheless, these discussions have not prevented the U.S. from imposing tariffs on steel and aluminium originating from the EU, among others.
The U.S. has presented several demands during the negotiations. One key demand is for the EU to apply the same tariff levels on imports that the U.S. applies – an especially challenging request, given the EU’s longstanding policy of maintaining low tariffs on industrial goods. Another demand concerns enhanced security, including cybersecurity. The U.S. also wants the EU to encourage companies to source products from the U.S., with energy being cited as a potential initial focus area. Additionally, the U.S. is asking the EU to improve the business climate for American companies operating in Europe.
Perhaps the most difficult demand for the EU is the reassessment of non-tariff trade restrictions. This would include recent EU measures related to sustainability and regulatory compliance – areas in which the EU has taken a leading role. Meeting this request will not be easy.
After three formal rounds of negotiations and numerous digital meetings, the deadline for an agreement is approaching. Following stakeholder consultations, the EU has published a list of U.S. goods that could be targeted for countermeasures, should U.S. tariffs be imposed. This potential response is referred to as “retaliation.”
In parallel, the EU has stated that it will submit any U.S. measures to the WTO dispute settlement mechanism. Given that these U.S. actions affect nearly all global trading partners, the repercussions extend well beyond the EU-U.S. relationship. For instance, China has announced it will stop exporting rare earth metals – critical raw materials needed for cars, smartphones, semiconductors, and other electronics. This decision could ultimately lead to global shortages.
Many companies, anticipating potential tariffs, have already stockpiled goods in the U.S. to bridge the early impact period. If the measures are implemented, it will be crucial for businesses to reorganise their supply chains efficiently. A thorough understanding of U.S. customs law will be essential. Factors such as rules of origin and the U.S. duty drawback system will play a key role. Relying solely on knowledge of European customs regulations is risky. It is strongly advised to consult experts with in-depth knowledge of the American legal framework.
ESC continues to closely monitor the ongoing negotiations.