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The European Union is bracing for economic disruption after U.S. President Donald Trump announced a new 15 percent tariff on all EU imports, set to take effect on August 1. While the decision will impact the entire 27-member bloc, the consequences will vary significantly among member states depending on their trade exposure to the American market.
Germany Most Exposed
Germany, the EU's largest economy and a global industrial powerhouse, stands to be hit the hardest. In 2024, German exports to the United States totaled $161.2 by far the highest among EU nations-thanks to robust sales of automobiles, machinery, steel, and chemicals. According to Germany’s statistics office Destatis, the U.S. accounts for 10.5 percent of German exports.
With a $84.8 billion trade surplus with the U.S. last year, Germany is particularly vulnerable. The German central bank has warned that the tariffs could reduce the country's GDP by 1 percent. Major automakers like Mercedes-Benz, which earns 23 percent of its revenue from the U.S., may face significant losses. While some SUVs are manufactured in the U.S. and exported elsewhere, any EU retaliation could spark further trade hostilities.
Ireland: A Special Case
Ireland, though smaller in economic scale, could also suffer considerably due to its unique trade structure. The country posted the highest EU-U.S. surplus in 2024 at $86.7 billion, with over a quarter of its goods heading to the American market.
Much of this trade is driven by U.S. pharmaceutical giants such as Pfizer, Eli Lilly, and Johnson & Johnson, which operate in Ireland to take advantage of its favorable 15-percent corporate tax rate-lower than the U.S. rate of 21 percent. These firms use Ireland as a base to host patents and supply the lucrative American market, where drug prices are significantly higher than in Europe.
Trump has made it clear that the pharmaceutical sector will not be exempt from the new tariffs, a move that could affect not only Ireland’s economy but also global drug supply chains.
Ireland is also home to the European headquarters of major U.S. tech firms like Apple, Google, and Meta, which could be indirectly impacted.
Italy and France: Mixed Exposure
Italy and France are less exposed in absolute terms, with U.S. trade surpluses of $44 billion and $16.4 billion, respectively, according to American data (France’s data suggests a smaller figure). However, key sectors in both countries are at risk.
France’s aerospace and luxury goods industries, including global giants like Airbus and LVMH, could be significantly affected. The U.S. represents about 25 percent of LVMH’s revenue, and a fifth of French exports to the U.S. are linked to aerospace.
Italy, meanwhile, is concerned about the impact on its automobile exports. The Franco-Italian-American automaker that owns Fiat and Peugeot has already suspended its earnings forecasts for the year amid trade uncertainty.
Additionally, southern European countries, including France, Italy, and Spain, may see their food and wine exports decline, as higher prices due to tariffs could cool U.S. consumer demand.
Smaller Economies Also Affected
Austria and Sweden, with surpluses of $13.1 billion and $9.8 billion, respectively, are also on Washington's radar. While smaller players in overall trade volume, they, too, risk disruption to niche industries and specialized exports.
EU Faces Strategic Challenge
The European Union, which sends 20 percent of its total goods exports to the United States, maintains an annual trade surplus of $235.6 billion with the U.S., second only to China. These new tariffs may further strain transatlantic trade relations and compel the EU to weigh retaliatory measures or seek diplomatic negotiations.
With the global economy already under pressure from inflation, war, and climate-related disruptions, the new U.S. tariffs introduce another layer of uncertainty that could reverberate far beyond the Atlantic.
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