USA-Europe Tensions: A Bill Of $9,500,000,000,000!

The tensions between Washington and Brussels are taking a worrying turn. While transatlantic trade represents a colossal market of $9.5 trillion, the new tariffs imposed by Donald Trump risk upsetting an already fragile balance. A trade war between the two economic powers could lead to inflation in production costs, a drastic decline in exchanges, and increasing instability for businesses.

A hardening of trade with immediate consequences

The climate of mistrust between the United States and Europe is intensifying. Donald Trump has announced a 25% increase in tariffs on European steel and aluminum. This decision is part of a strategy aimed at imposing reciprocal tariffs, aligned with those practiced by the EU.

The initiative is perceived as a protectionist gesture, denounced by the American Chamber of Commerce in Europe (AmCham EU), which warns of a major risk to the global economy.

“Rather than engaging in a policy of retaliation that would only harm both economies, the United States should sit down at the negotiating table,” insists Malte Lohan, president of AmCham EU.

The effects of these new measures could be felt very quickly on American production chains.

Indeed, European steel and aluminum account for 20% of imports of these materials to the United States, essential for the automobile, electronics, and industrial machinery sectors.

A rise in the prices of these components would lead to an increase in production costs, which would be reflected in the final price of products sold to American consumers.

The main consequences identified by AmCham EU are as follows:

• Increase in production costs: American companies dependent on European steel and aluminum will see their costs explode, which could directly impact the profitability of their products.
• Cascading effect on consumers: the rise in raw material prices will translate into inflation of finished product prices, and will weigh on the purchasing power of Americans.
• European economic retaliation: the EU could respond by increasing its own tariffs on strategic American products, further aggravating the protectionist spiral.
• Uncertainty for businesses: in the face of these tensions, investors are likely to suspend their decisions, which will slow down growth and weaken key sectors.

Towards a paralysis of exports and an investment crisis?

The tightening of tariffs does not only affect raw materials. Washington is now discussing the possibility of applying 25% tariffs on automobile imports, semiconductors, and pharmaceutical products from the EU.

Such a measure would hit European exporters hard, but also American companies dependent on these imports. Therefore, AmCham EU warns that “strong and proportionate countermeasures” could be implemented by the European Commission, particularly targeting exports of liquefied natural gas (LNG), crude oil, and American digital services.

The states most dependent on trade with Europe, such as Texas and California, find themselves on the front line. In 2023, Texas exported $96.9 billion worth of goods to Europe, while California reported $35.3 billion in sales to the continent.

If Europe decided to tax these strategic sectors more, the economic shock could be brutal for the American industry. Moreover, the threat of prolonged uncertainty over Washington’s trade policy is already hindering transatlantic investments and threatens to sustainably slow down the economy.

“The stakes go far beyond the simple question of tariffs: trade instability and the multiplication of tariff barriers risk causing a diversion of economic flows towards other markets. Thus, China and other emerging powers could benefit from these tensions to strengthen their exchanges with Europe, which would further weaken the United States’ position in the global market, as shown by the potential reorientation towards the BRICS.