US is more vulnerable to a trade war with EU than with China
On June 4, 2025, Donald Trump doubled tariffs on EU steel and aluminium from 25% to 50% in an attempt to attain a 'good quality' trade proposal from the bloc.
These actions came as Trump threatened to impose a 50% baseline tariff on the EU, and some of the US' closest strategic partners, in May. Trump has called the EU a 'mini-China' in the past, citing the US trade deficit in goods, specifically in cars and agricultural goods, and impatience with ongoing negotiations as the reasons for such extreme 'retaliatory' measures.
According to GlobalData TS Lombard, a 50% baseline tariff on the EU would wipe out an estimated 1.6% of EU GDP growth. With Eurozone growth figures for 2025 hovering between 0.2% and 0.5%, any increase in baseline tariff could result in recessionary pressures for Europe in the immediate future, with more exposed nations, like Ireland for instance, facing larger GDP shocks of up to 8%.
In response to this escalation, the EU has drawn up an import duty list of $21bn (€18bn) of US goods. The EU can now either engage in a tit-for-tat trade war, similar to the Chinese approach, or, similar to the British approach, try to reach a deal with the Americans.
A trade war with the EU will be politically and economically unsustainable for the Trump administration due to the history of the two powers, and their dependence on each other. Trump shied away from imposing 50% tariffs on the bloc, only rising tariffs on steel and aluminium, likely in an attempt to avoid a complete trade war between the two powers due to US exposure to EU imports.
With further retaliatory duties and section 301 tariffs coming into effect (after a delay) on July 9th 2025, the EU must also decide how to navigate a complex relationship with the largest superpower in history.
The EU is not like China, Cambodia, or Vietnam. These nations have much of their industrial base set up to export to the US, where the EU is one of the largest exporters to the US and one of the largest importers from the US.
The EU imported $370bn of US goods in 2024, exporting more than $600bn to the US in the same timeframe, representing the US' largest import source.
China, a nation roughly three times the size of the EU, only imported $144bn from the US in 2024. The EU is not the US' strategic enemy, nor is it forecasted to outpace the US economically anytime soon.
The US has not decoupled from the EU in the same way it has from China, making a full-on trade war difficult for the Trump administration to sustain economically.
The same is also true culturally. Trump always has to have perceived enemies to maintain power, as all populists do. Whether it's DEI initiatives within the federal government or 'illegal' immigrants, Trump has to have a non-specific group to present to his followers as the 'other'. He has done the same on the international stage, with his first premiership widely being recognised as the origin of the trade war with China.
Trump cannot do this with the EU. Trump cannot designate Europeans as the 'other' in the same way he could with illegal immigrants or the Chinese, due to the US' deep history and relations with Europe. Some 58% of the US' white population, a segment of the population that voted in droves for Trump, considers themselves European in some kind of way, according to a 2020 census from the US Census Bureau.
A similar trade war to that seen between China and the US, if carried out against the EU, would likely hurt Trump in the polls. Trump has previously claimed that he wants immigrants from 'nice' countries, such as Denmark or Switzerland, making any potential trade or culture war with the EU a complete U-turn.
Trump also does not seem to know what he wants from an EU trade deal. A revamp of EU VAT systems, promises of importing more US LNG, promises to decouple from China, or revamping the newly implemented EU carbon border adjustment mechanism (CBAM) all could be aims of the 47th President, but we'll never know. If Trump does not actually have any specific demands from the bloc, he is likely to place duties on EU goods again. Trump's temperament aside, if Trump cannot guarantee trade peace of mind for the EU, why should the EU bother negotiating with Trump?
Additionally, Trump only seems to be looking at the US trade deficit with the EU in goods. When it comes to services, the US has a sizeable trade surplus with the EU at around $109bn.
Retaliatory measures from the EU are unlikely to be popular within member states. The economic effects of US import restrictions will largely fall on US businesses and consumers, and while the EU will feel the effects of reduced US demand for EU goods, any additional tit-for-tat tariffs will result in further pain for citizens (and voters) in the bloc. European leaders know this.
Meanwhile, the UK's 'trade deal' with the US is narrow in scope, has no definitive timeline, and is a stopgap measure.
Retaliatory measures are not attractive either. Further tit-for-tat measures will turn voters away from parties in power, and nations that source large shares of their imports (Ireland, Belgium, France, and the Netherlands, for instance) from the US will likely fall out with Brussels over any further damage to the economy.
Member states are also unlikely to agree on retaliatory measures. The only other example of a continued tit-for-tat war with the Trump administration is the ongoing US-China trade war, a trade war that is very much still ongoing.
Trump's laser focus on the EU should be concerning for the bloc. The best course of action for the EU, however, is neither engaging in a tit-for-tat trade war nor negotiating a trade deal; rather, it may be to ignore Trump where possible.
The only goal Trump seems to have is to reduce the 'unfair' trade deficit in goods between the EU and the US (whether it is unfair or not is a whole other story), putting any potential deal in danger of being broken by an infamously erratic president.
A deal is more or less inevitable, given how dependent the US and the EU are on each other, both for security and trade. Despite this dependence, Trump has no specific goals in negotiating with the EU and is likely to turn on any future deal that the two powers sign.
Brussels should not be in a rush to sign a deal with Trump, given they will not benefit from either negotiations or tit-for-tat. The best course of action for the EU is to sit and wait, biding its time until Trump realises how dependent the US is on the EU. This is unlikely to happen, though, as European and US businesses will demand certainty.
In conclusion The ECB has cut the main rate from 2.25% to 2% in anticipation of said recessionary pressures from potential tariffs. GlobalData TS Lombard predicted back in early May 2025 that Trump would turn on the EU, and further tension is likely to occur. However, a full-on trade war between the US and EU would be foolish for an administration that is dependent on America's white, predominantly European, electorate.
"US is more vulnerable to a trade war with EU than with China" was originally created and published by Verdict, a GlobalData owned brand.
The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
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