President Donald Trump announced a proposal to impose a steep 50% tariff on European Union (EU) goods starting June 1, 2025, sharply escalating trade tensions between the US and the EU. Trump criticized the EU on his social media platform, Truth Social, accusing it of being "very difficult to deal with" and designed primarily to exploit the US in trade.
This move follows shortly after the US and China agreed to reduce some tariffs, a development that had eased global market worries. However, Trump's new tariff threat undermines that progress and signals his administration’s continued hardline stance toward European trade.
Trump’s key complaints center on the EU's restrictive trade policies, high tariffs on US goods, and legal actions against American companies. He warned that unless the EU addresses these issues, the US will enforce a tariff rate more than double the earlier 20% level announced in April. The tariffs currently remain high at 25% on steel, aluminum, and car parts, with plans to extend tariffs to pharmaceuticals and semiconductors.
The announcement caused immediate market turmoil, with US stock futures dropping 1.6% and Europe's main stock index falling 2.1%, reflecting investor concerns over renewed trade conflicts.
US trade officials are preparing to meet with EU counterparts to try and defuse the situation. Meanwhile, the EU has responded by approving a £21 billion tariff package targeting US goods such as maize, wheat, motorcycles, and clothing, set to potentially start by mid-July. The European Commission is also considering adding further tariffs on major US exports, including planes, cars, and bourbon whiskey.
European businesses are feeling the strain: shares of carmaker Stellantis fell 5%, and Deutsche Bank's stock dropped over 6%. Investors now anticipate potential interest rate cuts from the European Central Bank to help cushion the economic impact.
While the US has made some recent trade progress with China and the UK, negotiations with the EU have stalled, with Trump's administration warning that countries unwilling to negotiate fairly will face severe tariff measures.
The upcoming US-EU trade discussions will be critical in determining whether this tariff standoff escalates into a broader trade war or if a diplomatic resolution can be found.
