Former President Donald Trump has been the first to escalate tensions with the European Union (EU). He dangles an unreal 50% tariff on all EU imports, starting June 1, 2025. This announcement comes in the context of much continued frustrations over stalled trade talks, which Trump was calling “going nowhere” just yesterday. The effects of these tariffs would be dire for both the US and EU economies.
In retaliation, on April 2, 2023, the US government implemented a 20% “reciprocal” tariff on a wide range of EU products. This decision triggered an outpour of alarm from international trade allies. In order to encourage the negotiations Trump lowered the rate, although only temporarily. This further provided for a 90-day pause intended to promote productive, good-faith discussions. After this lull, Trump announced that the negotiations were not up to snuff.
“Our discussions with them are going nowhere! Therefore I am recommending a straight 50% Tariff on the [European Union], starting on 1 June 2025.” – Donald Trump
The announcement causing the biggest and quickest market impact was posted over the weekend on Trump’s Truth Social service. Stock markets reacted to investor panic, with the S&P 500 opening down 1% and the Nasdaq down 1.3% on open. IMPLAN’s own analysts caution that implementing such high tariffs would be a recipe for even more economic turmoil.
Trump has already set his sights on EU imports with vague threats. He’s mulling a massive 25% tariff on iPhones not produced in the U.S. This move signals a broader strategy targeting various sectors, including pharmaceuticals and semiconductors, as the US administration seeks to leverage trade negotiations.
Scott Bessent, an economist involved in the discussions, noted that the initial 90-day pause on tariffs was contingent upon countries negotiating in good faith. He voiced disappointment in the quality of these negotiations.
“The 90-day pause on the April 2 tariffs was based on countries or trade blocs coming to us and negotiating in good faith,” – Scott Bessent
The EU is already preparing to retaliate. These can amount to approximately $108 billion if the Administration’s negotiation efforts fail to deliver strong results. Our response raises new and increased dangers posed by sharp trade tensions. These growing tensions may have far-reaching effects for multiple industries and thousands of consumers on both sides of the Atlantic.
With the negotiations clock ticking down, countries are stepping up their game in the negotiations. They are currently making efforts to reduce their level of tariffs before the end of the 90-day period. As the situation is still developing, stakeholders on all sides are watching closely.