In recent years, there have been significant ruptures between the major actors of the global trade system. Trade relations between the European Union (EU) and the United States of America (USA) have entered a period of severe tension due to mutually implemented tariffs and retaliatory decisions as of 2025. Although transatlantic economic integration has historically had a strong structure, current developments have revealed structural differences and strategic conflicts of interest between the parties. This analysis will evaluate the main reasons for the trade tension, the implemented policies, and possible effects in detail.
1. Background and Causes of Tension
As of 2024, the trade volume between the EU and the US has reached approximately $585 billion. However, this high volume does not hide the deepening structural imbalances between the parties. The US administration argues that the agricultural subsidies provided by Europe under the Common Agricultural Policy create an unfair competitive environment for American farmers.[1] The fact that these subsidies reduce the competitiveness of US producers and disrupt the market balance has long been a subject of criticism from Washington.
Another factor in escalating tensions is Europe’s regulations on the digital services sector. Digital services taxes, in particular, have reinforced the perception that US-based technology companies are being targeted. The Washington administration has viewed these practices as threatening the country’s economic sovereignty.
Environmental regulations are also among the factors that increase transatlantic tensions. The Carbon Border Adjustment Mechanism (CBAM), implemented within the scope of the European Green Deal, has created additional costs for products such as steel and aluminum imported from the US. While the EU presents this regulation as a tool to combat climate change, the US has interpreted this step as “green protectionism.”[2]
On a strategic level, extending American policies to limit China’s economic influence in Europe has created a new area of disagreement between the EU and the US. Washington has demanded joint action against Beijing’s subsidy-based economic model, but the EU has been cautious in approaching these demands. This difference in approach has paved the way for the US to impose an additional 25% customs duty on EU-origin steel and aluminum in early 2025. Although this decision was presented on the grounds of “national security,” it has been evaluated in many circles as direct economic protectionism.[3]
2. EU Retaliatory Policies and Decision-Making Mechanisms
The European Commission (EC) reacted to the new tariffs implemented by the US by finding them to be contrary to World Trade Organization (WTO) rules. This situation violated the EU’s foreign policy approach based on free trade principles and caused severe discomfort in the EU institutions. Commission President Ursula von der Leyen noted the EU’s obligation to protect its strategic sectors and stated that harsh countermeasures could be taken if necessary. Following this statement, the EC decided in March 2025 to impose additional taxes on approximately 26 billion euros worth of American-origin products. These products included items with symbolic and cultural meaning, such as Harley-Davidson motorcycles, jeans, meat products, and home textiles.[4] These choices by the EU aim to maintain economic balance and reflect its intention to take a political stance towards the public and the US administration. Targeting certain products that have become symbols of American culture, in particular, shows that the EU uses its retaliatory policy as a strategic communication tool.
3. Economic and Sectoral Impacts
Trade wars are not limited to customs duties alone, but also have decisive effects on investment decisions, supply chains, and employment levels. According to an Irish-based economic study, the US tariffs on European products could cause up to 60,000 job losses in Ireland alone. Strategic sectors such as automotive, aviation, pharmaceuticals, and technology are directly affected by such sanctions. Germany’s 12% decline in automotive production reveals the fragility of European industry.[5] On the other hand, the difficulty in accessing high-tech products imported from Europe in the US increases production costs and strengthens inflationary pressures.
4. Diplomatic Initiatives and Negotiation Process
Both sides are aware of the economic damages of a large-scale trade war. For this reason, an increase in diplomatic initiatives has been observed as of April 2025. German Ambassador to London Miguel Berger emphasized that dialogue channels should be kept open, saying, “The EU is ready to retaliate, but there will be no winners in a trade war.”[6]However, the Washington administration is unwilling to back down due to increasing protectionist pressures in US domestic politics. The Trump administration’s growing influence, especially after the 2024 Presidential Elections, shows that protectionism is gaining strength in domestic politics.
5. Evaluation in Terms of the International Trade Regime
The EU-US trade tension questions not only the economic relations between these two actors but also the structure of the global trade system. Although the WTO has played an essential role in the past as a regulator and supervisor of international trade, the effectiveness of this institution has gradually decreased with the tensions experienced in recent years. The slowdown in the decision-making processes of the WTO and the decreasing interest of major powers in multilateral regulations lead to serious concerns about the future of global trade. Shaping trade only with bilateral solutions shows that this institutional structure is weakening and that a more irregular period has begun in international economic relations.
In this context, the adoption of interest-based approaches by prominent economic actors, prioritizing their national interests instead of a rule-based system, initiates a serious normative disintegration process in the trade regime. Such approaches make organizing international trade within predetermined rules difficult and lead to economic uncertainties. In particular, countries with high economic power follow their domestic strategies and threaten the egalitarian and transparent structure of international trade in this process.
Moreover, developing countries are directly affected by these trade tensions. Global supply chains are vital to the production processes of developing countries. However, conflicts between prominent economic actors have adverse effects on the supply chains of these countries and create financial instability for these countries. Such tensions can increase production costs worldwide, reduce trade volumes, and negatively affect global economic growth more broadly. The stability of international trade poses greater threats, especially for developing countries, because these countries can be directly affected by the decisions of major economies. As a result, the trade tension between the EU and the US includes political, strategic, and economic differences. Although the possibility of a comprehensive and long-term conflict seems low when the economic dependence between the parties is considered, recurring crises can lead to deepening trust issues. Therefore, it is essential to continue constructive dialogue and strengthen the multilateral trade regime. Otherwise, ensuring predictability and stability in the global trade system will be even more difficult.
[1] “US accuses EU of unfair farm subsidies amid tariff tensions”, Financial Times, https://www.ft.com/content/0f8bf631-f24c-48da-905f-e37f8dc5d5f8?utm_source, (Date Accession: 21.04.2025).
[2] “EU carbon levy fuels US backlash”, Politico Europe, https://www.politico.eu/article/eu-pollution-greenhouse-gas-c02-carbon/, (Date Accession: 21.04.2025).
[3] “EU will react against unlawful US tariffs, says European Commission”, Euronews, https://www.euronews.com/my-europe/2025/02/10/eu-will-react-against-unlawful-us-tariffs-says-european-commission, (Date Accession: 21.04.2025).
[4] “EU retaliates against Trump tariffs with €26bn countermeasures”, The Guardian, https://www.theguardian.com/us-news/2025/mar/12/eu-retaliates-against-trump-tariffs-with-26bn-countermeasures, (Date Accession: 21.04.2025).
[5] “The 2025 US-EU Tariff War: Economic Disruptions and Paths to Stability”, Eurasia Review, https://www.eurasiareview.com/15032025-the-2025-us-eu-tariff-war-economic-disruptions-and-paths-to-stability-oped/, (Date Accession: 21.04.2025).
[6] “EU is prepared to retaliate but prefers to negotiate”, Wall Street Journal, https://shorturl.at/HisDd, (Date Accession: 21.04.2025).
