European automakers, pharma manufacturers, and more brace to contend with the threat of an EU-US trade war as Trump announces new metal tariffs.
Not content with 25% tariffs on its closest trade partners and a further 10% levy on Chinese goods, US President Donald Trump has announced a flurry of new trade restrictions on goods from the European Union (EU).
Overnight, President Trump announced 25% tariffs on foreign steel and aluminium. The move has prompted retaliatory measures from the EU, with president of the European Commission, Ursula von der Leyen saying that she “deeply regretted” the US president’s decision, adding that “Unjustified tariffs on the EU will not go unanswered,” and that the EU would respond with its own economic sanctions to “safeguard its economic interests.” Von der Leyen added: “We will protect our workers, businesses and consumers.”
Procurement thrown into disarray
Approximately 25% of EU steel exports go to the US — about €3bn worth a year over the past decade. Canadian prime minister, Justin Trudeau — whose government responded with its own retaliatory tariffs on the US last week — said that Canadians would “stand up strongly and firmly if we need to.” He described the Trump administration’s move as “unacceptable”.
The latest round of tariffs could be the next domino to fall on the way to a worldwide trade war, severing international ties, and driving up prices for consumers in multiple markets — especially the US. If Trump’s tariffs continue to alienate the US’ trade partners, Simon Bowes, CVP Manufacturing Industry Strategy EMEA at supply chain solutions company Blue Yonder, notes “it could set off a chain reaction across the globe.” He adds: “This could limit the ability of companies to leverage the global specialisation and expertise that currently drives international trade. For instance, the world’s reliance on Taiwan for semiconductors or Germany’s expertise in automotive engineering would become more complicated if countries erected barriers against each other. The rise of tariffs would likely stifle competition and innovation, and while some industries could benefit from protectionism, others would undoubtedly face higher costs and reduced market access.”
Manufacturing procurement braces for disruption
The impact of Trump’s administration on some European industries like pharmaceuticals, Bowes explains, may force businesses into “a catch-22 dilemma.”
He explains that organisations must “either bear the cost of relocation or absorb the tariffs and face increased costs for manufacturers and consumers.”
The automotive market in Europe is particularly at-risk, with the industry already “struggling due to competition from China,” as well as the withdrawal of electric vehicles (EVs) subsidies from key markets, and the ongoing transition to European sustainability regulation. “The US is a critical market for European car makers,” says Bowes. Therefore, “tariff threats are sending the industry to boiling point — and if placed on internal combustion engine vehicles (ICEVs), it would put a tin lid on everything that’s going bad for the industry. Increasingly, automotive businesses are having to plan for a potential future with dramatically reduced sales to the US.”
What’s next?
Whatever the long-term consequences, Rob Shaw, GM EMEA at Fluent Commerce, notes that short term consequences are a global supply chain in chaos.“The trade market can only be described as an unstable, ever-changing state,” he says. Should the US proceed with imposing more and more tariffs, “other countries will retaliate, as we’ve already seen with China. In this scenario, tariffs may be imposed in the opposite direction, raising costs within the supply chain.”
Ultimately, he adds “it’s consumers who will bear the brunt of these changes. To protect their profit margins, businesses will inevitably pass on higher costs, placing additional financial strain on buyers already struggling with economic pressures.”
