The inauguration of Donald Trump as the 47th President of the United States marked the start of a new phase in global trade. With his “America First” agenda, Trump swiftly introduced policies to protect US interests. Among the most disruptive for Europe were tariffs on steel and aluminium imports, along with additional duties on derivative products.
These tariffs can significantly impact EU industries, disrupting supply chains and weakening investment flows across the Atlantic. While the Trump administration claims these measures protect American jobs, they will raise costs and created economic uncertainty for both EU and US businesses 1.
At the time of writing, the European Commission is considering its response to the US administration. A response which should focus on strategic unity and minimizing economic damage. This opinion article aims to provide some food for thought on this.
A lose-lose approach: The pitfalls of Transatlantic tariffs
European companies have made major investments in the US, and the reverse is also true. Transatlantic trade relies heavily on these investments. To keep prices competitive, businesses need to import as well as export. Adding tariffs on each other’s products risks creating a lose-lose situation. It could raise costs, weaken investment flows, and stifle innovation, leading to long-term growth challenges and uncertainty in international markets.
Instead of increasing duties, it may be more beneficial for the EU and US to focus on reducing trade barriers. Removing tariffs and non-tariff barriers could help protect existing investments and ensure economic stability. This might also keep transatlantic value chains competitive and resilient.
Addressing the impact and implementation challenges
The US decision to impose new tariffs on steel, aluminium, and derivative products from the EU and then to widen the new tariff regime on a global scale has created some confusion. Businesses are still evaluating the full impact. This uncertainty increases compliance costs and puts both companies and customs authorities in a difficult position. The EU should engage in a dialogue to obtain clear guidance from the US administration to help reduce the burden on all stakeholders involved.
Strategic unity in responding to US tariffs
The EU’s response to these tariffs needs to be balanced and carefully considered. Any actions should be legal, proportionate, and targeted to minimize negative side effects. Given the interconnected nature of transatlantic value chains, it seems important to minimize disruptions. Maintaining a close dialogue with businesses could help ensure unity and support for the EU’s strategy.
Finding negotiated solutions should be a priority. Protecting European interests while avoiding unnecessary harm to businesses is essential. Burden-sharing among sectors should be fair, without disproportionately affecting specific industries. Clear guidance would help companies comply with any new measures.
Beyond tariffs: Addressing real competitive threats
While Trump’s tariffs pose challenges, many EU businesses are more worried about the longstanding issues of the “unfair competition” from Asian countries and the EU’s declining competitiveness. For example, certain Chinese practices, such as State subsidies and undercutting prices, are seen as putting European companies at a disadvantage. These issues are often perceived as more damaging than US tariffs and more urgent to address.
Furthermore, Mario Draghi has recently put it bluntly: “Forget the US – Europe has successfully put tariffs on itself”. Writing in the Financial Times in February 2025, highlighted that internal EU barriers might pose a greater threat to growth than US tariffs. He noted that “Europe’s internal barriers are equivalent to a 45% tariff on manufactured goods and a 110% levy on services” based on IMF estimates. Draghi argued (again) that reducing these internal barriers could do more to boost competitiveness than merely reacting to external trade pressures.(2)
From a business perspective, three major issues continue to challenge EU competitiveness: overregulation, high energy prices, and labour shortages (3). While the Commission has proposed important initiatives like the Clean Industrial Deal and the Action Plan on Affordable Energy, and has made clear that it understands the general issues, they may not provide immediate relief, and somehow disregards some important elements, first of all the urgency of the situation.
Simplifying regulations and addressing energy costs are essential for maintaining resilience, both internally and externally and to secure Europe’s economic future. To achieve this, the Commission and EU leaders need to act decisively to turn intentions into effective actions.
Looking ahead: Diversifying to build strategic resilience
To build resilience, the EU should act quickly to diversify its trade and investment strategies. Speedy ratification of agreements with Mercosur and Mexico, as well as advancing talks with ASEAN countries and India, are definitely crucial. Strengthening partnerships with existing allies could also maximize benefits and reduce dependency on single non-EU countries.
Improving internal market efficiency by cutting bureaucracy and encouraging innovation may also support Europe’s global competitiveness. Addressing internal and external challenges together could help the EU safeguard its economy and reduce vulnerability to external pressures.
A clear and pragmatic path forward
Europe must navigate these challenges with strategic unity and practical foresight.
Reacting hastily to US tariffs might undermine long-term stability. Instead, adopting a proactive approach that focuses on strengthening economy and competitiveness and builds diversified trade relationships could position Europe to withstand external pressures competitiveness and to gain negotiating leverage and reduce the risk of damage and economic coercion.
Very importantly, the EU should also maintain a close dialogue with businesses to ensure unity and acceptance of the EU’s actions. Providing clear guidance once measures are decided will help ensure harmonized implementation across the EU.
(1) According to the Commission, the US tariffs will affect a total of €26 billion of EU exports, which corresponds to approximately 5% of total EU goods exports to the US. European Commission’s website, Mar 12, 2025
(2) Mario Draghi’s Opinion on the Financial Times published on 14 February 2025
(3) BusinessEurope’s Reform Barometer 2025, 19 March 2025