US tariffs and their impact on Europe—Considerations for businesses

In early 2025, President Donald Trump instigated a series of measures intended to address concerns regarding illegal immigration, drug trafficking, and economic security. These measures included the introduction of significant import duties on key industries, namely steel, aluminum, automobiles, and technology. 

The implementation of these duties was accompanied by a re-emergence of global trade tensions, with the administration citing the need to protect domestic industries. This decision prompted an immediate and intense international reaction, with major trading partners responding with tariffs, formal complaints to the World Trade Organization, and heightened diplomatic negotiations. As markets adjust and businesses reevaluate their supply chains, the long-term consequences of this assertive trade policy remain uncertain.

In the following article we will outline the new US tariffs, the European reaction and customs considerations, i.e., what entrepreneurs should consider from a tariff-avoiding perspective when making business decisions. 

Overview of the measures that have been implemented by the US

A comprehensive table of most current and proposed measures, duty rates and affected goods/countries:

• February 1st, 2025: 
  In an effort to address concerns about illegal immigration and drug trafficking, President Trump announced tariffs on imports from Mexico (25%), Canada (25%), and China (10%).

• February 3rd, 2025:
  Following protracted negotiations, a consensus was reached on the implementation of a 30-day suspension of tariffs for Mexico and Canada, with both countries undertaking a commitment to enhance their anti-drug trafficking measures.

• February 4th, 2025: 
  The implementation of tariffs amounting to 10% on all Chinese imports is proceeding as scheduled.

• February 10/11th, 2025:
  In a move that has been met with a mixed response from global trade partners, President Trump has announced plans to impose a 25% tariff on all steel and aluminum imports. The move is intended to provide support for domestic industries in the United States and is expected to have the greatest impact on trading partners such as Argentina, Australia, Brazil, Canada, EU countries, Japan, Mexico, South Korea and the United Kingdom.

• February 18th, 2025: 
  The United States government has announced its intention to impose a 25% tariff on automobile imports with effect from April 2nd, 2025. This measure is intended to provide support to the domestic automotive industry. Furthermore, the government is also considering the implementation of tariffs of 25% or higher on pharmaceuticals and semiconductors, aimed at reducing reliance on foreign suppliers. The imposition of tariffs by the US has had a significant impact on the European automotive industry, given the United States’ status as a pivotal export market. Carmakers and suppliers are facing combined revenue losses of several billion euros. Thus, the proposed tariffs have the potential to result in a substantial reduction in operating profits and weaken the competitiveness of European manufacturers, potentially leading to a decline in market share and job losses. The EU pharmaceutical industry is also likely to be impacted, with US tariffs of 20% potentially reducing German pharmaceutical exports by a third. This could lead to a decline in sales and hinder investment in research and development, which could compromise the industry’s capacity for innovation and competitiveness in the long term.

• February 27th, 2025:
  It has been confirmed by Trump that a reintroduction of tariffs at a rate of 25% will be applied to imports from both Canada and Mexico, and an additional 10% tariff on Chinese goods, with effect from 4 March 2025.

• March 1st, 2025:
  In an effort to address the current challenges in the domestic lumber industry, President Trump has signed an executive order with the objective of increasing US lumber production. Concurrently, he has initiated a probe into the potential implementation of tariffs on imported lumber.

• March 4th, 2025: 
  The 30-day deferral period concludes, and the 25% tariffs imposed on trade with Canada and Mexico are implemented. Additionally, the tariffs on Chinese imports are increased from 10% to 20%, precipitating the emergence of new trade conflicts.

• March 12th, 2025:
  The implementation of tariffs amounting to 25% on steel and aluminum has been officially initiated, exerting an effect on EU exports in consequence of the revocation of previous exemptions.

• March 13th, 2025:
  In a recent development, US President Trump has issued a warning to the European Union, threatening to impose 200% tariffs on wine, champagne, and other alcoholic beverages if the EU does not withdraw its tariffs on whiskey. This move follows the EU’s response to US tariffs on steel and aluminum, wherein the EU announced its own tariffs on US products, amounting to 26 billion euros. In response to Trump's demand, France has expressed its rejection and has announced countermeasures. France and Italy, whose wine exports to the USA totaled around 4.9 billion euros in 2024, would be particularly affected.

• March 26th, 2025:
  President Trump announced a 25% tariff on cars and car parts for imports into the US. The tariff enters into force on April 2nd, 2025 with charges for imports of cars as of the following days. For car parts charges are set to start in May. This action will especially target Mexico, Japan, Canada and Germany as the top foreign suppliers of cars and car parts into the US.

The impact on the European Union

The imposition of tariffs by the US, amounting to 25% on steel and aluminum, has exerted a substantial burden on European industry, given that it has led to increased costs for exports to the US and concomitant weakening of the competitiveness of European manufacturers.

Companies may be compelled to either transfer the additional costs to their customers through price increases or to reduce their profit margins, with the result that economic losses will be incurred. This is particularly problematic for those countries which export large quantities of steel and aluminum, such as Germany and France, whose steel and aluminum industries are heavily dependent on international markets.

The tariffs have the potential to result in a decline in production, job losses, and the implementation of countermeasures by the EU, thereby further exacerbating the transatlantic trade conflict.

The European Union’s response to the imposition of US tariffs

The European Union has adopted a robust response to the tariffs of up to 25% imposed by the USA on steel, aluminum, and other products. The EU Commission has declared its intention to implement a combination of existing and novel countermeasures to safeguard European companies and consumers from the economic ramifications.

Phase one: Re-introduction of existing tariffs

The European Union is countering the tariffs recently imposed by the US on steel and aluminum imports by reintroducing its own countermeasures. These tariffs, which were originally introduced in 2018 and 2020 in response to US trade restrictions but later suspended, will now come back into force, effective April 1st, 2025.

The reintroduced tariffs will encompass a broad spectrum of US products, including bourbon whiskey, motorbikes, jeans, orange juice, peanut butter, and boats, with an estimated value of 2.8 billion euros. Additionally, products such as steel products, industrial goods, and special steel and aluminum products, valued at approximately 3.6 billion euros, will be subject to the tariffs.

Phase two: New punitive tariffs

New tariffs are in considerations, and the EU will introduce new tariffs on US products worth 18 billion euros, covering a wide range of industrial and agricultural products, including fruit, cereals and other agricultural products. The European Commission initiated the consultation process with relevant stakeholders on March 12th, 2025.

As part of this process, a list of products that are to be affected by the additional countermeasures has been published. This list has been made available on the website of the Directorate-General for Trade (DG Trade) and includes both industrial and agricultural products. The industrial products affected include steel and aluminum products, textiles, leather goods, household appliances, tools, plastics, and wood products. In the agricultural sector, the affected products include poultry, beef, certain seafood, nuts, eggs, dairy products, sugar and vegetables. 

The objective of these measures is to ensure that the economic harm caused by the tariffs imposed by the US is offset to the same extent by EU countermeasures EU officials have also said that the countermeasures are targeting products with high symbolic value, such as Bourbon and motorcycles. Further analysis also suggests that EU tariffs are designed to hit products from republican-leaning states, e.g. soy beans from Louisiana as well as beef and poultry from Arkansas and Nebraska.

Following the conclusion of the consultation phase on March 26th, 2025, the EU Commission will undertake a comprehensive evaluation of the feedback received, consolidate the results, and finalize the draft implementing act. The legal basis for this act is the Enforcement Regulation (Regulation (EU) No 654/2014), given that the US measures are categorized as safeguard measures.

The implementation of the countermeasures, including the new duties, is scheduled for mid-April, at which point the implementing act will enter into force and the countermeasures will officially take effect. The EU has emphasized its openness to dialogue with the US. The objective of this dialogue is to reach a mutually beneficial negotiated solution that avoids an escalation of the trade conflict and will be mutually beneficial.

Tariffs from a UK perspective

The UK’s Prime Minister, Sir Keir Starmer, met with President Trump in Washington on the 27th February 2025 to discuss various political topics, including the possible introduction of tariffs on UK manufactured commodities.

Since President Trump was inaugurated, the United Kingdom has been impacted by the raft of tariff measures introduced by the US Government to protect US manufacturing.  

The 25% tariffs on steel and aluminum products introduced on March 12th, 2025 will increase costs to US businesses—although the level of UK exports in these commodities pales in comparison to the EU and other export nations.  Commentary from UK experts has suggested that the tariffs will impact existing military contracts and therefore increase US budgetary spending.

Unlike the EU, the UK has decided against retaliatory measures as it seeks to negotiate a free trade agreement with the US. This is in part due to President Trump’s positive announcement that a US-UK trade deal could be signed “rather quickly”.  

This could provide significant protection from additional blanket tariff measures imposed by the US. To offset the benefits, the European Union is very clear in its message that the acceptance of certain US products could impact any agreement over the simplification of border requirements between the UK and EU.

With the EU being the UK’s largest trading partner (for exports), Prime Minister Starmer will likely be wary of upsetting the EU Parliament at a time when discussions on the current EU-UK Trade Agreement are due to begin in the coming months.

If the UK can avoid further harmful tariffs from the US, it could find itself in a very good position for boosting its manufacturing industry and increasing its market share in the US. 

Time will tell, but UK manufacturers and exporters must view this subject with caution and plan for all eventualities to ensure plans are in place to combat any emergency tariffs.

Other countries reactions

The introduction of tariffs on steel and aluminum imports by the United States has elicited a strong reaction from various global actors. Among the nations most adversely affected by this decision, Canada has expeditiously declared its intention to impose retaliatory measures.

Prime Minister Justin Trudeau has stated that the nation will implement a 25% tariff on over $20 billion worth of goods from the United States, including steel, aluminum, and other products. This decision is intended to safeguard the domestic economy and to express disapproval of US policy.

In response, China and Japan have voiced their concerns regarding the potential consequences for global trade, urging the US to reconsider its position to avoid the escalation of tensions. 

Australia has also expressed its disapproval, though it has not yet implemented any countermeasures.

Concerns regarding the economic impact of these tariffs are being voiced by business leaders worldwide, with market uncertainty rising and companies facing higher costs and supply chain disruptions. Analysts have warned that a prolonged trade conflict could lead to a global recession. In summary, the majority of non-EU countries are opposed to the US tariffs and are considering retaliatory measures to protect their economies.

Customs considerations for businesses

Warehousing

For companies who are importing bulk consignments of stock, the use of customs warehousing is a viable option to help facilitate cash flow and avoid any unnecessary duties.

As the tariff war is constantly developing, the use of a customs warehouse could be key to managing the exposure of any additional tariffs that may be imposed by the EU.

In fact, by storing goods in a customs warehouse, the importer will be able to react quickly to any developments.  Stock can be imported without payment of any EU tariffs for an unlimited time. It also allows for duties to only be paid upon removal from the warehouse so costs can be managed more effectively, thus ensuring the business maintains profitability during these uncertain times.

For importers who have a slower turnaround of stock, a customs warehouse may be beneficial as it could minimize exposure to any additional tariffs as the measures may have been removed by the time the goods are subject to a sale. This could manage any uncertainty and minimize the risk of unwanted tariffs on the goods.

Any implementation of a customs warehouse can be costly, both financially and in resources, so it may not be an option for many EU importers. The alternative is to use a third-party customs warehouse operator who can be employed to store goods on the importer’s behalf.  There will be additional cost, and this must be weighed against the potential benefits and financial planning required to ensure the imported goods remain profitable.

Customs warehousing should be a key consideration for importers who are exposed to the EU countermeasures and should be a reviewed as part of any planning to determine the benefits this procedure may present the business in managing its duty liabilities.

Country of Origin – Considerations for the reorganization of supply chains

Importers and exporters will be considering solutions to mitigate the costs and risk for their business. Whether it involves finding legal ways of importing the goods from the US without the countermeasure duties or exporting to the US without US tariffs applying to those goods. 

Such efforts may result in new sourcing/supplying routes. In this respect it is vital to prevent that such adjustments are deemed to be evasions of the applicable tariffs. How could that be?

The relevant factor for the application of punitive tariffs when importing or exporting to the US is not whether the goods are physically shipped from the US or the EU. but the origin of the goods. According to the regulations such duties always apply to goods originating from the respective country, i.e., the punitive tariffs would also apply if US origin goods were shipped from Canada to the EU. Thus, one cannot avert tariffs by simply changing the shipping route or adding a trade agents to the supply chain. 

To avoid such tariffs the origin must be changed to a country which is not subject to the punitive tariffs. The origin of goods is the country where their last substantial processing took place. Consequently, for example, to avoid the duties on US motorcycles, the production must take place outside of the US, e.g. Mexico. 

But even if production is moved to another country, the production step in that country might not be recognized if such a relocation is considered to be a circumvention of trade measures according to Article 33 of the UCC-IA. This is the case if the relocation takes place in a proximity of time to the implementation of the trade measure and if the only reason for the relocation is to evade the trade measure. 

Decisions of national and international courts have shown that such a risk is not of purely theoretical nature:

• The European Court of Justice (Decision dated 21st November 2024 – C-297/23 P “Harley Davidson”) decided that circumvention was occurring as Harley Davidson moved part of its production capacities from the US to Thailand to avoid the EU punitive duties on US motorcycles. 
• The Fiscal Court of Düsseldorf (Ruling of March 23, 2022, Case No.: 4 K 2282/20 Z) decided that a circumvention would be occurring if a Chinese producer of fasteners were to establish a new production site in Indonesia to avoid anti-dumping duties in the EU. 

Im- and exporters are highly advised to carefully review their supply chains for any effects of bans or trade policy measures. As far as goods are concerned which are subject to additional duties from certain countries, particular attention should be paid to the “origin” according to applicable regulations. The same applies to EU producers considering the relocation of their production sites.