“Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.”
Donald Trump, The Art of the Deal
President Trump has never seen trade policy as just economics – it’s a high-stakes game, and winning is everything. Throughout his career, he has framed trade deficits as evidence of American weakness, blaming past administrations for allowing U.S. manufacturing to decline while foreign goods flood the market. With Washington already engaged in economic battles to the north (Canada), south (Mexico), and west (China), the European Union is the next player at the table. But this isn’t just about tariffs – it’s about leverage, dominance, and rewriting the rules of the global trade game.
Trump’s past trade policies provide a clear playbook: tariffs serve as both economic leverage and political theater. The President has always viewed the European Union as an economic rival rather than a political ally. His core motivation? A reverent belief that for too long Europe has taken advantage of the US through trade imbalances, unfair subsidies, and restrictive regulations. All while benefiting from America’s defensive umbrella under NATO. His previous administration imposed tariffs on European steel, aluminum, and luxury goods – moves he justified by citing “national security” and “unfair competition.”.
Like the opening volleys to Canada, Mexico and China, Trump believes the US economy has been “bled dry” by unfair trade practices and the EU is a prime offender in his eyes. The White House’s new economic team is targeting European automotive giants, agricultural subsidies, and digital service taxes that disproportionately impact US tech companies given their global size and reach. After years of courting Silicon Valley, the EU may realize that a legion of FDI trojan horses are now well within their walls and their masters have the ear of the US President and their hands on the keyboards of US trade policy.
But what’s the endgame?
The Trump administration wants Europe to concede trade advantages to the US, relax its regulatory grip on American firms, and open up EU markets further – all while keeping US businesses and supply chains within American borders. In short, the new Administration is seeking to amend the rules of the trade game.
European Players Brace for Impact, differently.
If Trump follows through with tariffs on the EU, the economic fallout will not be evenly distributed across member states. As the EU’s largest exporter to the US, Germany would feel the sharpest hit – its €158 billion ($171bn) worth of goods exports to the US in 2023 makes it a prime target, particularly in automotive, machinery, and industrial goods. And with major operations in Mexico already, Germany’s automakers now face the prospect of a second trade war front opening.
Meanwhile, the Netherlands, the largest EU importer of US goods, valued at €76 billion ($82bn), would likely experience significant supply chain disruptions, particularly in logistics, chemicals, and high-tech sectors.
However, when measuring reliance on US trade relative to total exports, Ireland emerges as the most vulnerable, with over 25% of the country’s global exports destined for the US. The country’s pharmaceutical, tech, and financial services industries – which are deeply intertwined to American firms – would be highly exposed to any tariffs or regulatory retaliation.
For Italy and Germany, about 10% of their total trade is tied to the US, meaning their luxury goods, automotive, and industrial equipment sectors would see significant pressure. In contrast, Eastern European economies, which trade less with the US, might escape the worst effects.
Trade War and Find Out.
If President Trump does follow through on tariffs against the EU, the ripples will impact both sides of the pond:
- Supply Chain Disruptions: Many US industries – especially automotive, aerospace, and pharmaceuticals – rely on European components. Tariffs could lead to cost spikes and production delays.
- Shifting Investment Patterns: European firms may rethink their US investment strategies, either doubling down on local production to bypass tariffs or looking for alternative markets.
- Site Selection Considerations: Companies weighing US market entry or expansion (especially manufacturing firms) may need to factor in tariff risks when selecting locations. Regions with strong manufacturing incentives and trade infrastructure may gain appeal.
All quiet on the European Front – for now…
Thus far, European leaders are focusing on policies rather than the personalities. EU foreign policy chief Kaja Kallas warned that a US and Europe trade war means “the one laughing on the side is China”. Meanwhile, European Commission President Ursula von der Leyen acknowledged the “potential challenges” in transatlantic trade – widely seen as a reference to looming tariffs – while emphasizing that the EU is prepared to respond.
Historically, during previous trade disputes, the EU has imposed tariffs on a range of US products, including steel, aluminum, agricultural goods, and consumer items. This precedent suggests that a variety of sectors could be affected if the EU decides to implement retaliatory measures.
While specific sectors for retaliatory tariffs have not been officially referenced, there is speculation that the EU may target US technology companies. The European Commission is considering utilizing its “anti-coercion instrument,” which would allow for trade restrictions in services, potentially impacting major US tech firms – a sector dominated by US multinationals.
Trade War or Trade Opportunity? How to Stay Ahead.
If Trump follows through on EU tariffs, the effects will be immediate – supply chains will buckle, investment patterns will shift, and trade flows will be rewritten. The stakes for businesses, economic development agencies, and investors are high. The EU may retaliate, but uncertainty is already forcing companies to rethink their strategies.
The global trade landscape is shifting fast. Whether you’re an economic development agency looking to attract investment or a business recalibrating your international strategy, OCO Global offers the intelligence, strategy, and connections to help you navigate uncertainty and seize new opportunities.
