Trump tariffs take hold: is the EU next?

US reciprocal tariffs and announcement of additional tariffs

On 13 February 2025, President Trump signed a Presidential Memorandum on Reciprocal Trade and Tariffs to develop the 'Fair and Reciprocal Plan' to restore fairness in US trade relationships and counter non-reciprocal trading arrangements.

Within 180 days of the date of this Memorandum, the Director of the Office of Management and Budget will assess the fiscal impacts on the US and deliver a written assessment, outlining the next steps on any reciprocal tariffs to President Trump.  The assessment will focus on five key areas, including:

• Tariffs imposed on US products;
• Unfair, discriminatory, or extraterritorial taxes imposed by trading partners, including Value-Added Tax ("VAT");
• Costs to US businesses, workers, and consumers arising from non-tariff barriers and/or unfair policies and practices, including subsidies, and burdensome regulatory requirements on US businesses operating in other countries;
• Policies and practices that cause exchange rates to deviate from their market value; and
• Any other practice that imposes any unfair limitation on market access or creates structural impediment to fair competition with the market economy of the US.

In an immediate response, the European Commission issued a Statement on 14 February 2025 reaffirming that the EU maintains some of the lowest tariffs in the world and sees no justification for increased US tariffs on exports. On 18 February 2025, the Commission published a Q&A document on the US reciprocal tariff policy, providing guidance on the value of EU-US trade and investment, VAT in relation to tariffs, US internal taxes on goods and services, and the EU's trade surplus with the US.

On 18 February 2025, President Trump threatened to impose tariffs of at least 25% on imported automobiles in what will likely be the next round of US tariffs. These new tariffs could take effect from 2 April 2025, although Trump did not specify which countries are being targeted in this next round. Other expected tariffs exceeding a rate of 25% could be introduced on semiconductor chips and pharmaceutical imports, although the timing of these is less clear.  

Cars and pharmaceutical products are two of the EU's major exports to the US. EU Commissioner for Trade and Economic Security, Maroš Šefčovič, was in Washington, DC this week to ask the US to delay implementing tariffs while the two governments focus on 'joint priorities' and find mutually beneficial solutions. The EU Trade Commissioner has agreed to discuss potentially lowering the EU's 10% tariffs on passenger cars to align with the US's current 2.5% tariffs on cars. However, he suggested that US tariffs of 25% on pick-up trucks would also form part of the negotiation.

To assess the impact of these reciprocal tariffs, EU businesses (particularly those in the abovementioned industries) should take proactive steps, such as: (i) review existing contracts and vulnerability of their supply chains; (ii) conduct origin analysis of the manufactured goods; and (iii) consider accelerating shipments.

New global tariffs on steel and aluminium

On 10 February 2025, US President Trump signed a Proclamation imposing a 25% blanket tariff on all steel and aluminium imports into the US as of 12 March 2025, including EU imports of these goods. Hours before this Proclamation was made, and with circulating rumours of tariffs on steel products, the European Commission released its Statement on potential US steel and aluminium tariffs, stating that the "imposition of tariffs would be unlawful and economically counterproductive, especially given the deeply integrated production chains the EU and US established through Transatlantic trade and investment."

Trump's decision to substantially raise tariffs to a flat 25% was made without any exceptions or exemptions, therefore terminating agreements in place on quotas and Tariff-Rate-Quotas ("TRQs") on steel goods, including those TRQs previously negotiated with the EU. As the US is the second biggest export market for EU steel producers, the proposed tariffs will hit the EU industry hard. The European Steel Association ("EUROFER") emphasised that the EU stands to lose up to 3.7 million tonnes of steel exports to the US and that the tariffs will exacerbate the "already dire market environment" of the European steel industry.

President of the European Commission, Ursula von der Leyen, announced "firm and proportionate" action against the tariffs, and Commissioner for Trade and Economic Security, Maroš Šefčovič, will today chair a meeting with EU trade ministers via a video conference call to discuss what joint action the EU should take, such as negotiations with the US administration, and/or potential countermeasures.

By way of background, safeguard measures are a type of trade defence instrument reserved for temporary relief where there has been a sharp increase in imports of a product causing serious injury to the domestic industry. Safeguard measures are used sparingly by the EU and take the form of TRQs reflecting traditional trade flows, above which a duty is levied on imports. Safeguards can only be in place for a maximum period of eight years after its first imposition and must be reviewed at regular intervals during their period of application.

The EU first imposed provisional safeguard measures on imports of certain steel products in July 2018, with the definitive measures taking effect from 1 February 2019. The safeguards were imposed for an initial period of three years i.e. until 30 June 2021 and were prolonged until 30 June 2024 after a prolongation review investigation. In January 2024, the Commission received a substantiated request by 14 EU Member States to examine whether the current safeguard measures should be extended further.  As a result of another prolongation review investigation concluded in June 2024, the measures were adjusted and prolonged until the maximum period of 30 June 2026, at which point the safeguards on steel will expire. Nevertheless, on a further substantiated request by 13 EU Member States, the Commission initiated a new investigation in December 2024 to determine whether further adjustments to the measures would be justified based on evidence of a change of circumstances since the last review. The request contained information on the simultaneous effects of the increase of global overcapacity and the continued decrease in EU demand for steel resulting in widening gaps with the current level of duty-free quota volumes. The Commission has until 31 March 2025 to complete its detailed investigation. This ongoing investigation may be taken into consideration by the EU as it decides on the appropriate response to the threat of 25% tariffs on steel and aluminium proposed by President Trump.  

Whilst the EU has been preparing for the potential return of US tariffs since before President Trump was re-elected, it has been cautious about revealing any details of its negotiating tactics. We will continue to update this blog post as negotiations between the EU and the US develop.

As of 4 February 2025 9:00 AM (CET), this information is accurate. Please note that this update reflects a rapidly evolving situation.

On 1 February 2025, US President Donald J. Trump signed three Executive Orders formally imposing the highly anticipated tariffs on goods originating in Canada, Mexico, and China. In light of this development and the continued looming threat of tariffs on the EU, it is imperative that European businesses act now to review their contracts, supply chains, and source of raw materials or components to assess the potential impact of the likely additional duties imposed on all or certain categories of EU goods exported to the US.

Overview of the Executive Orders

Leveraging several US legal frameworks, such as the International Emergency Economic Powers Act and the National Emergencies Act, Trump was able to promptly implement tariffs on goods originating in Canada, Mexico, and China, without the need for approval by Congress. The use of this legislation, and therefore the tariffs, was justified by Trump to protect US citizens from the public health crisis caused by the sustained influx of illicit opioids, such as fentanyl, from all three countries, as well as illegal immigration from Canada and Mexico.

The Executive Orders state that the following tariffs will apply on goods originating from these countries, in addition to any other duties or fees already applicable to these imports:

• Canada – 25% duties on imports on "all articles that are products of Canada" except for energy resources (such as crude oil, natural gas, refined petroleum products, biofuels etc.) which will receive a lesser duty of 10%.
• Mexico – 25% duties on imports of "all articles that are products of Mexico".
• China – 10% duties on imports of "all articles that are products of PRC".

In addition, the Executive Orders do not include a de minimis exemption, usually set at $800 in the US, meaning that even low-value goods will be caught by the tariffs, with no mechanism for importers to seek exclusions or exemptions.

The term "all articles that are products of" used in the Executive Orders is important as it is connected to the rules of origin, which we discuss in more detail below.

Immediate Retaliation

Almost immediately on the announcement of the proposed tariffs, the Canadian Government hit back with retaliatory measures to implement a 'surtax' of 25% on goods originating in the US. These will be implemented in two stages: (i) the first surtax affecting $30 billion worth of US goods (full list can be found here) which were due to take effect from 4 February 2025, and (ii) the second phase of 25% Canadian tariffs affecting $125 billion worth of additional US goods which were due to come into force 21 days later.

On hearing the news of new tariffs, China's Ministry of Commerce announced its plans to challenge the latest US tariffs through the World Trade Organisation, whereas the Mexican government intended to retaliate with both tariff and non-tariff measures, although details of these measures have not yet been revealed.

Less than 24 hours before the measures were due to take effect, it was announced on Trump's social media that, following negotiations with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, he has agreed to suspend tariffs on Canada and Mexico for 30 days. This suspension is on the condition that both Mexico and Canada reinforce their border security measures. Mexico has agreed to deploy 10,000 soldiers to monitor the US's southern border, and Canada has committed C$1.3 billion to reinforce its border against drug trafficking and illegal migration into the US, including appointing a specialist “Fentanyl Czar” to oversee the plans on controlling drug trafficking.

However, Trump did proceed with his order to impose additional 10% tariffs on all Chinese products, which took effect this morning on 4 February 2025. China swiftly responded by announcing retaliatory measures, including 15% tariffs on coal and liquefied natural gas, and 10% tariffs on American crude oil, certain vehicles like pick-up trucks, and agricultural equipment. These new tariffs on US imports will commence on Monday, 10 February 2025. China is also launching an antitrust investigation against US company, Google, and will implement new export controls on various rare metals and chemicals in retaliation to the US tariffs.

The EU markets respond

Trump has already expressed frustration with the US goods trade deficit with the EU on several occasions, threatening to impose tariffs on European products "very soon".  

When the news of Trump's new tariffs on Canada, Mexico, and China reached the EU on Monday morning, trading on the European stock markets dropped in reaction to the US measures.

The automotive sector, in particular, is highly sensitive to such measures as evidenced by the fact that shares of important EU car manufacturers fell by more than 5% on Monday 3 February 2025.

What can EU businesses do?

As US tariffs on goods originating in the EU are likely to follow the new measures on Canada, China, and Mexico; European businesses should be proactive and can take several steps to prepare for potential trade disruptions caused by Trump's trade measures to protect their interests and to maintain business continuity.

It is important to note that new measures proposed by Trump affect goods originating in these three countries. Therefore, businesses should review their supply chains to fully understand where they are sourcing their raw materials and components.  If this impacts the designation of origin of the final goods, they should consider sourcing materials from alternative countries.

By way of background, in international trade, the rules of origin determine the 'economic nationality' of traded goods, taking into account non-originating components and raw materials of the overall product. Please note that the country of origin of the product is not necessarily always the country from which the goods are shipped.

We recommend that European businesses also review their contractual clauses, particularly if they export to the US in case they need to adjust them in view of the potential new measures. As the situation is constantly evolving, companies should stay informed about this topic and seek legal advice where they may have concerns.

The Fieldfisher Trade Team will be continuing to update this blog on an ongoing basis.