EU prepares for retaliation on Trump tariffs but hopes for agreement

Irish Times

23-05-2025

The
European Union
will continue to prepare retaliatory action after
Donald Trump
said the US would impose a general 50 per cent
tariff
on all European imports in a week's time, a threat that brought the threat of a full-blown transatlantic trade war closer than ever.
But Brussels will continue to seek agreement with the US on tariffs and the hope in Brussels, senior sources said, was that the shock announcement by president Trump was simply a ploy to gain leverage in the talks between the two sides.
Mr Trump's latest tariff threat, targeting all exports from the EU, would deliver a hammer blow to key manufacturing sectors, including autos, aerospace, chemicals and other goods, business groups have warned.
The US is the EU's largest single trade partner, accounting for just over 20 per cent of goods exports worth more than €530 billion in 2024, according to figures from the European Commission.
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Ireland, along with Germany, Italy and France, is the leading exporter within the bloc.
Maria Demertzis, the head of the economy strategy centre at the Conference Board think-tank in Brussels, said the impact of a 50 per cent tariff would be 'unsustainable', particularly for exposed sectors where the US was a key market.
Economic modelling conducted when Trump imposed a 20 per cent tariff last April estimated that the tariffs would hit the bloc's GDP by 0.2 per cent. This would grow to 0.5 per cent if 50 per cent tariffs were imposed, Ms Demertzis added.
'It's still a relatively small overall macroeconomic effect, although it will be large in some countries, like Ireland, [which] are more reliant on exports to the EU,' said Ms Demertzis. In terms of sectors, 'the effects will be very big indeed', she added.
Medicines were the most exported goods from the EU to the US in 2024, with almost €80 billion drugs sold into the US market, according to Eurostat.
Nathalie Moll, director general of the European Federation of Pharmaceutical Industries and Associations, said the group was 'deeply concerned' about increased trade tensions between Europe and the US.
She warned tariffs would create shortages of medicines and urged the US and the EU to avoid them at 'all costs'. 'Tariffs on medicines would be nothing short of a disaster for patients and [the] industry on both sides of the Atlantic,' she said.
US pharmaceutical companies have built large manufacturing bases in the EU, particularly in Ireland, where they have taken advantage of a lower tax rate.
Mr Trump has complained that Ireland has 'got the entire US pharmaceutical industry in its grasp'. 'We don't make our own drugs, our own pharmaceuticals any more,' he said. 'The drug companies are in Ireland and they are in lots of other places – China.'
Speaking after Mr Trump's announcement, Ian Talbot, secretary general of International Chambers of Commerce Ireland, said: 'The proposed increase in tariffs on EU imports introduces uncertainty into a stable and integrated trade relationship. The immediate effect for businesses will be to delay investment decisions, disrupt supply chains, and undermine market confidence.
'The EU/US relationship is not only of immense economic importance; it is the cornerstone of the rules-based global trading system. Increasing tariffs between these two major economies could disrupt global business at a time when stability is crucial.'
He said that de-escalation, rather than retaliation should be prioritised:
'In line with our colleagues at the International Chamber of Commerce, we call on the US and the EU to redouble ongoing efforts to renew their trade relationship. A swift and co-ordinated de-escalation is essential to preserve the trust and stability that underpin international commerce, business investment and job creation.'
SpiritsEurope, which represents whiskey and other spirit producers across the EU, said it regretted any actions that could escalate tensions in transatlantic relations.
'A 50 per cent tariff would impact not only EU producers but also the US hospitality sector and the wider economy,' it said in a statement. 'It would take us further from our sector's shared goal on both sides of the Atlantic: a return to a fair and reciprocal zero-tariff transatlantic regime for spirits.'
The EU and the US are each other's largest spirits export markets, it noted, urging negotiators on both sides 'to intensify their efforts to reach an agreement securing a return to tariff-free transatlantic trade in spirits as a matter of urgency – and no later than early July'.
Commenting of the latest US move, US treasury secretary Scott Bessent said, the EU needed to move faster in finding an accommodation.
'I've said there are 18 important trade deals we have to do. I'm working most with Asia and that group has come forward with some very interesting proposals.
'They are negotiating in good faith. I would hope this would light a fire under the EU because I have said before, the EU has a collective action problem here. It is 27 countries but they are represented by this one group in Brussels.
'Some of the feedback I have being getting is that some of the individual countries don't even know what the EU is negotiating on their behalf.' - Copyright The Financial Times Limited 2025