How Trump’s Latest Tariff Threat Risks Deeper Damage to Europe’s Economy

Economists had already downgraded growth for the European Union, and the new duties would hit industries there especially hard. Companies are looking for ways to blunt the impact.

The European economy, already weakened by an intensifying trade war, faces a new threat after President Trump said on Saturday that he would impose a 30 percent tariff on goods from the European Union. Economists say the move could worsen the region’s struggles in the months ahead.

European Union officials, meeting in Brussels on Sunday, decided to hold off on imposing any countermeasures and continue negotiations in hopes of reaching an agreement before the newly announced measures take effect on Aug. 1.

“At the same time, we will continue to prepare further countermeasures so we are fully prepared,” Ursula von der Leyen, the president of the European Commission, told reporters in Brussels. “We have always been clear that we prefer a negotiated solution.”

E.U. economists recently downgraded their growth forecast for the 20-member eurozone in 2025 to 0.9 percent, from 1.3 percent predicted in late 2024. The European Commission, the bloc’s governing body, blamed “the impact of increased tariffs and the heightened uncertainty caused by the recent abrupt changes in U.S. trade policy and the unpredictability of the tariffs’ final configuration” for the lower expectations.

A 30 percent U.S. tariff on European goods “would keep E.U. economic growth stuck around the zero line for longer,” said Bert Colijn, chief economist of the Netherlands at ING Bank. “Quarters of negative G.D.P. growth cannot be ruled out,” he added.

High tariffs would hit several industries in Europe particularly hard, from wine and luxury goods to chemicals and pharmaceuticals, which Mr. Trump has threatened with 200 percent tariffs in the coming year. His announcement on Saturday also left in place a painful 25 percent tariff on European auto imports — in addition to the existing 2.5 percent rate — as well as a 50 percent tariff on aluminum and steel.

As grave as things look now, European companies and politicians may find ways to blunt the impact. Because Mr. Trump imposed similarly steep tariffs on goods from other major trading partners, including China, South Korea and Japan, U.S. importers would face higher costs for a wide array of imported goods, giving them few options but to accept the higher prices, said Moritz Schularick, president of the Kiel Institute for the World Economy.

In addition, many countries in southern Europe, are less affected by tariffs because they do not export as much to the United States as their industrial powerhouse neighbors to the north, including Germany and France, Mr. Colijn said. European capitals are also raising military and infrastructure spending, which is expected to bolster growth.

After two years of recession, Berlin is injecting hundreds of billions of stimulus into the German economy, which is projected to grow 1.5 percent next year. Mr. Schularick said that in the coming year, the latest tariffs would shave 0.5 percent off economic growth in Germany, which is Europe’s largest economy.

“This would dampen the upswing, but would be manageable,” Mr. Schularick said.

Europeans initially faced the threat of 20 percent tariffs when Mr. Trump began his global salvo against U.S. trading partners on April 2, only to have that figure scaled back to 10 percent. Negotiators and economists had largely accepted that level, and many European businesses had begun operating on the assumption that it was here to stay. At the same time, European negotiators were working to win concessions for crucial sectors including cars, steel and aluminum.

The head of Italy’s main business lobby had already warned that a 10 percent tariff could cost the country 20 billion euros, or $23.6 billion, in lost exports and lead to the loss of 118,000 jobs next year.

A 30 percent tariff would be even more damaging to many European companies, business groups warned. Hildegard Müller, who heads the main lobby group for German carmakers known as V.D.A., called the latest tariffs “regrettable” and urged negotiators to find a solution “as quickly as possible.”

She added that the tariffs on cars imposed since May were already costing German automakers billions.

BusinessEurope, a trade group that represents Europe’s largest companies, said that keeping a 30 percent tariff in place would be “unacceptable.”

Other big European industries, like wine, spirits and other agricultural products, which are important for France, Italy and Spain, would suffer under the higher rate. Around 90 percent of French Cognac production, for example, is exported to the United States. Earlier this month, the European Union reached an agreement with China on brandy exports, settling a dispute with another major market for Cognac producers.

President Emmanuel Macron of France hit back at Mr. Trump’s tariff letter on Saturday, urging Europe to retaliate with punitive tariffs on American imports to Europe if the 30 percent rate was left in place.

The Spanish prime minister, Pedro Sanchez, was also critical of the threatened tariffs on Saturday. “Economic openness and trade create prosperity,” he said. “Unjustified tariffs destroy it.”

More on Trump’s Tariffs

• U.S.-Brazil Trade War: Right-wing Brazilians wanted sanctions against the judge prosecuting Jair Bolsonaro, the country’s former president. President Trump opted for tariffs. The move shows how Trump is using tariffs to settle scores against his political enemies and has raised new legal questions about the president’s powers over trade.
• Goods From E.U. and Mexico: Trump announced in letters posted to social media that he would place a 30 percent tariff on goods from the European Union and Mexico, upending months of careful negotiations.
• Negotiations With Canada: Canada’s new prime minister, Mark Carney, has been called the “Trump whisperer,” and negotiations have been cordial and professional. But it’s been a wild ride, including a threat to impose a 35 percent tariff on Canadian imports that upended negotiations.
• Tariffs on Kazakhstan: The Central Asian nation, rich in critical minerals, is deepening its ties to China but does relatively little trade with the United States. The Trump administration’s aggressive approach — including a warning letter to strike a deal by Aug. 1 or face a 25 percent tariff — is a bit of a turnabout for the country.
• Influence in Asia: Secretary of State Marco Rubio wants to bolster ties with the continent to counter Beijing’s power, but Trump’s tariff threats have nations asking why they should align with Washington.
• Policy or Cudgel?: In 2005, the economist Pietra Rivoli followed the production of a T-shirt from a cotton farm to a Walgreens to understand global trade. Today, she sees a new system arising.
• Surviving Trump’s Trade War: Eagle Creek’s experience underscores how Trump’s chaotic approach to tariffs is having a real impact, even before the toughest levies take effect.

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