Monday 28 April 2025
Overview of US Tariff Measures and Their Impact
In early 2025, the United States launched major tariff actions against various countries and industries, citing national emergencies, economic imbalances, and unfair trade practices.
Impact of the Tariffs
The sweeping tariffs introduced by the US, though temporarily scaled back under the reciprocal tariff system, are already reshaping the global trade landscape. These wide-reaching measures threaten to disrupt international supply chains and trade routes across multiple sectors. Markets have responded with heightened volatility, reflecting investor anxiety over rising costs, potential shortages, inflation, and waning business and consumer confidence. If these trade restrictions persist, they could destabilize international markets further and heighten geopolitical frictions. For EU businesses, the consequences are especially significant given the US is the region’s largest export destination. The effects are expected to vary across industries, depending on each sector’s reliance on the US market for sales and investment. Key sectors such as automotive, pharmaceuticals, and machinery are particularly exposed. In 2023, each of these key EU export sectors individually recorded values of over USD 200 billion to the US market.
While pharmaceuticals were mostly spared under the reciprocal tariff system, recent signals from Washington suggest this may change. The EU automotive sector is especially vulnerable, as it is already navigating a period of transition. The newly imposed 25% tariff on cars, combined with broader trade actions affecting Mexico, Canada, and China, poses a major threat to the tightly interlinked automotive supply chains. Given that many EU carmakers depend on production hubs and parts from across borders (particularly in Mexico) these tariffs could raise manufacturing costs, delay production, and further strain an already pressured industry. In addition to direct costs, companies may also be hit by ripple effects from expected retaliation by US trading partners. These countermeasures are likely to raise prices, disturb supply chains, and add uncertainty to the global trade system. Preliminary forecasts point to a potential global GDP decline, which would further discourage investment and complicate strategic planning for international businesses.
Shifting trade dynamics are also expected to cause indirect disruptions. Countries affected by US tariffs may redirect exports to new markets, putting pressure on local industries elsewhere. The EU is already feeling these effects, as seen in the steel sector, which is under strain from excess global capacity and a surge in Chinese exports. This has prompted new trade defense actions from the European Commission, echoing patterns seen during the Trump presidency. Beyond broad market shifts, sector-specific retaliation could also carry risks. EU discussions around potential countermeasures targeting US banking and tech sectors are raising concerns. Restricting US financial services, limiting access to capital markets, or imposing investment caps could backfire by disrupting the flow of US capital, especially in high-risk or innovation-heavy sectors such as venture capital and digital technology, where EU funding alternatives remain limited. Experts warn that such steps could have unintended consequences for the EU economy, amplifying the challenges facing businesses navigating this uncertain trade environment.
In conclusion, as global trade evolves, tariffs continue to shape international trade policies and operations. Despite political gridlock, the WTO remains a venue for challenging U.S. actions, with countries like Canada and China already taking steps. Businesses face uncertainty, rising compliance costs, and are adapting risk strategies, while some investors pull back from cross-border deals. Still, opportunities may arise in sectors tied to U.S. domestic priorities, and European firms could benefit from gaps in financial and digital services.