In 2025, United States (US) President Donald Trump’s decision to impose an additional 50% tariff on products imported from the European Union (EU) and 25% on smartphones,[1] is seen as an important breaking point in global trade dynamics. This decision is a continuation of the Trump administration’s long-standing protectionist trade policies and accelerates the restructuring of international production and supply chains.
The new tariffs are likely to directly affect the automotive, pharmaceutical, aviation and food sectors in particular. For example, the value of EU pharmaceutical exports to the US is around 80 billion euros and there could be potential shortages of these products. In the automotive sector, a new 50% tariff on top of the existing 25% tariffs could weaken the competitiveness of brands such as Audi, Porsche and Mercedes-Benz in the US market. There could also be price increases and supply problems in the food and beverage sector, especially for products such as champagne and olive oil.
The high tariffs imposed by the Trump administration constitute a recent example of an approach referred to as “protectionism” in the economic literature. These policies aim to protect domestic producers from foreign competition and reduce the trade deficit. However, such high tariffs may have negative effects on the market in the short and medium term.
In the technology sector, the supply chains of global players such as Apple and Samsung are mostly concentrated in Asian countries. The goal of withdrawing production to the US should be evaluated against a backdrop where concepts such as “cost advantage” and “logistics optimization” should be taken into account. High labor costs and inadequate infrastructure in the US make the economic sustainability of this process difficult. In addition, disruptions in production processes can lead to supply chain interruptions and increase production costs.
In the short term, the Trump administration’s tariffs mean higher product prices for US consumers, while creating uncertainty in companies’ production plans. This situation highlights the complexity of international trade and the fragility of global production networks. If multinational companies reconsider their production and procurement strategies, this could lead to structural transformations in the US economy.
The US decision to impose high tariffs on EU imports has been harshly received by Brussels. The European Commission calls this “trade blackmail” and is preparing retaliatory tariffs on 21 billion euros worth of US products. These measures are designed to cover a wide range of products, including wine, automotive, chemicals and health products. The President of the European Commission, Ursula von der Leyen, has stated that these retaliatory measures will come into effect if a negotiated solution cannot be found. It is also reported that the EU is considering regulatory measures to prevent Chinese products from being diverted to the US. These retaliatory measures are seen as a harbinger of a new wave of tension in transatlantic trade relations.
These developments could have a direct impact on the EU economy, leading to lower growth rates and inflationary pressures. For example, some economists estimate that these tariffs could reduce the EU Gross Domestic Product by 0.5% over three years.[2] At the diplomatic level, negotiations between the EU and the US are ongoing and proposals such as a zero tariff agreement on industrial products are on the agenda. However, there are significant differences of opinion and expectations between the parties.
The Trump administration is imposing these tariffs in order to win the support of the working class, especially in industrial areas, and to encourage domestic production. US Treasury Secretary Scott Bessent has stated that this move is being used as a pressure tool to force the EU into negotiations. At a time of rising economic nationalism and protectionism, this strategy can be seen as a step towards reshaping US trade policies. However, there are also warnings that this approach could disrupt global supply chains, leading to inflationary pressures and economic uncertainty.
Trump’s tariff announcements caused significant fluctuations in financial markets. European stock markets fell sharply, while US and European stocks lost value. In particular, the automotive and luxury goods sectors suffered losses of more than 3%. On the other hand, yields on Germany’s 2-year and 10-year government bonds fell as bond markets sought a safe haven. While the euro depreciated against the dollar, the Japanese yen strengthened as a safe haven. In this period of reshaping global trade and supply chains, investors are carefully monitoring the long-term effects of US trade policies.
The US’s planned 50% tariff on the EU has the potential to affect not only trade relations between the two sides but also global economic balances. The EU’s retaliatory measures and the US’ domestic political objectives further complicate this process. Financial market volatility and economic uncertainties exacerbate the impact of this trade war on the global economy. It is important that negotiations between the parties continue and that diplomatic solutions are sought. Given the current situation, this trade war can be expected to escalate further and threaten global economic stability.
[1] “What EU exports are hit hardest by Trump’s 50% tariff threat?”, FT, https://www.ft.com/content/30ae7dfb-d55b-4aaf-ad62-0826d833460a, (Date Accessed: 24.05.2025).
[2] “EU sets out possible 95-billion-euro response to US tariffs”, Reuters, https://www.reuters.com/business/autos-transportation/eu-sets-out-95-bln-euro-countermeasures-us-tariffs-2025-05-08/, (Date Accessed: 24.05.2025).
