Today just after midnight, US tariffs on steel and aluminum have come into force, and in response the European Commission announced its plans to retaliate to a similar degree (albeit on a different range of imports from the US).
While the impact on certain sectors and product lines could be large, the aggregate macroeconomic effect on Europe is likely to be small. Of more concern, according to Nomura’s George Buckley, is that this is only the opening gambit – Europe is now firmly in Mr Trump’s sights, particularly being responsible for more imports to the US than any other bloc, and his comments from the White House just underscored that
- *TRUMP: IM NOT HAPPY WITH THE EU
- *TRUMP ON THE EU: WE’LL WIN THAT FINANCIAL BATTLE
- *TRUMP: ABSOLUTELY WILL PUT TARIFFS ON CARS
Nomura has published a report (available to pro subs in the usual place) with European macro forecasts which are based on the US ultimately applying 10% tariffs against Europe, and the EU responding in kind. Below we excerpt the key highlights from the report:
Tariffs – the opening gambit
The EU this morning announced “proportionate” retaliatory measures and imposed tariffs on US products entering the EU in response to Trump’s imposition of 25% tariffs on global aluminium and steel imports to the US.
The US tariffs, which are now in force, build on those Trump imposed in 2018 in two ways:
- i) 25% rather than the 10% aluminum tariffs in 2018,
- ii) the new tariffs broaden the base by adding more final products (not just the raw metal itself).
In total, the US tariffs will affect around €26bn of EU exports to the US (which is about 5% of total EU exports to the US).
Europe’s response
In response, the European Commission has said it will retaliate in two stages.
First, at the start of April, it will reinstate the tariffs put in place during Trump’s first term.
Second, from mid-April, it will apply tariffs to an additional set of US imports – for that purpose the Commission is consulting over the next two weeks on a list of products (industrial and agricultural products, not just Harleys and bourbon) on which it might add tariffs. The EU’s intention is to place retaliatory tariffs on €26bn of US imports.
- The Commission’s statement can be found here.
- A fuller memo on its countermeasures is here.
- And a list of US imports to which the EU is considering adding tariffs is here.
European macro implications
The European Commission has calculated that the additional US tariffs on EU exports into the US of aluminum and steel “will result in US importers having to pay up to €6bn in additional import tariffs”.
Should the EU intend on raising similar tariff revenue in response to this move, then that cost needs to be put into some context:
- €6bn extra costs of imports relative to total US goods imports into the EU (of $375bn in 2023) is noticeable – about 1.7%.
- €6bn relative to total extra-EU goods imports globally into the EU ($2.4tn in 2024) is small – about 0.25%.
- And €6bn relative to total EU nominal GDP (€18tn in 2024) is of course is very small indeed (about 0.03%).
So, while at the industry/product level these tariffs and counter-tariffs will be noticeable (via 1. lower demand by the US for steel and aluminium products – unless of course European manufacturers respond by taking a hit to prices/profits, and 2. higher prices in Europe on certain imported products), the impact across the entire EU economy should be small.
The bigger effect should be from what is to come
As Nomura notes, there are more important and worrisome potential tariffs to consider. The tariffs Trump has announced so far are, after all, only the opening gambit. Trump is less than two months into his second presidency, and Europe is now firmly in his sights – probably more firmly following today’s European response.
Indeed, the EU exports well over €500bn of goods to the US each year (Figure 1), the largest of any individual bloc (and greater than Canada, Mexico or China), while the US trade deficit with the EU has ballooned over recent years (Figure 2).
Trump is likely to announce further tariffs on 2 April before Europe’s full retaliation to steel and aluminum can even take effect. And sizeable negative effects on global – and European – growth may also hit even before major tariffs are implemented, via the rise in trade policy and geopolitical uncertainty that Trump’s presidency is generating.
More in the full Nomura report available to pro subs.
Tyler Durden
Wed, 03/12/2025 – 15:50
