Impact of American Tariff Policy on World Trade, Consequences for Europe

The tariff policy implemented by the Donald Trump’s administration, with protectionist measures not seen in more than 100 years, has radically transformed the global trade landscape, significantly affecting both China and the European Union. Initially intended as a strategy to achieve “reciprocity” in international trade, the imposition of tariffs by the United States has had profound economic and political effects. Trump justified these measures by arguing that if other countries taxed US exports, the US should do the same. Under this principle, general tariffs of 10% were imposed, rising to 145% on imports from China, and 20% on EU products, in addition to specific tariffs of 25% on steel, aluminium and the automotive sector, including its components. 

One of the main objectives of this policy was to reduce US trade deficits, a goal that Trump justified by appealing to so-called “generous reciprocity”. According to his argument, if countries such as the European Union applied a 39% tariff on US goods, the US would respond with 20%, presenting it as a fair and moderate measure. However, this comparison was misleading, as it was based on point figures and not on the average tariff actually applied. In reality, the EU’s average tariff was much lower, so Trump’s calculation gave a distorted picture of the trade imbalance and did not fully justify his retaliatory tariff proposal. 

The negative impact of the measure
Although presented as beneficial measures for the US national economy, the results have shown that their positive effects were very small and far outweighed by their negative consequences. The tariffs have generated distrust in the markets, with an impact on their debt and the dollar, increased costs for consumers and businesses, and the risk of disruption of production chains due to lack of supplies. The threat of recession, inflation and shortages has become apparent. Sectors such as the automotive sector have been hit hard, and although a downgrade is expected in July, uncertainty continues to weigh on employment and investment in the sector. In addition, American business leaders dependent on goods produced in China, such as Apple and Nike, and large distribution companies such as Amazon and Walmart, have put pressure on the White House in view of the obvious negative consequences of this protectionist policy.

Although presented as beneficial measures for the US national economy, the results have shown that their positive effects were very small and far outweighed by their negative consequences

Europe responds
In Europe, the consequences have also been noticeable. The EU has opted for a dual approach, including a temporary pause in its tariff countermeasures and a proposal to increase €50bn worth imports of  US goods, as part of its negotiating strategy in the face of Trump’s tariff policy: a willingness to negotiate, offering a ‘zero-for-zero’ tariff agreement on industrial goods, and the preparation of countermeasures that could affect up to €18bn worth of US goods. These European responses include industrial and agricultural products, and reactivate measures suspended since 2020. The European Commission maintains its willingness to negotiate but warns of the lack of concrete progress on the US side. Despite contacts between the European Commissioner for Trade, Maros Sefcovic, and his US counterpart, Howard Lutnick, positions remain far apart, and the need for a joint effort to reach a solution is underlined.

Sectors most vulnerable to tariff risk
The uncertainty generated by this situation has become one of the main economic risks for Europe. The most exposed sectors, such as the automotive, chemical and machinery industries, fear a reduction in investment and employment in the medium term. The impact has been such that up to 40 European and US companies have issued “profit warnings“, suffering stock market falls of up to 9% on average. This has been seen with European companies such as SAP, Heineken and Schneider Electric warning of significant losses due to the appreciation of the euro and US tariffs, estimating financial impacts of up to EUR 1.25 billion. Moreover, some economists warn of a possible deflationary scenario in Europe, driven by oversupply from Asian goods no longer going to the US, and weak domestic demand, a situation that could further slow growth.

The most exposed sectors, such as the automotive, chemical and machinery industries, fear a reduction in investment and employment in the medium term

Impact in Spain
Spain, although relatively less exposed due to its lower volume of direct exports to the United States, has also felt the effects. The Secretary of State for Trade has opted to speak of a “tariff situation” rather than a “trade war”, but acknowledges the real impact on sectors such as olive oil, automotive, steel and aluminium. In February 2025, Spanish exports to the US grew by 38% in volume as an anticipated response to the entry into force of new tariffs. This increase, however, is one-off. 

Spanish SMEs, especially those with international activity, have been severely affected by the increase in US tariffs. According to CEPYME, more than 30,000 companies are facing higher costs, regulatory uncertainty and loss of competitiveness. In Catalonia, PIMEC warns that hundreds of SMEs in sectors such as agri-food, chemicals and textiles have been affected, while in Murcia an upturn in demand for financing has been detected. Access to credit continues to be a barrier, according to SMEunited, making it difficult to adapt to the new business scenario. Moreover, only 9.1% of Spanish SMEs maintained export activity in 2024, compared to higher figures in previous years. 

Business organisations are calling for an urgent response with direct aid and specific measures to avoid the closure or relocation of business miles, and to mitigate the effects, the Spanish government has launched a “Business Response and Relaunch Plan” that includes lines of financing and internationalisation. 

In parallel, Spain has reinforced its trade diversification strategy, identifying alternative markets such as Mercosur, Mexico, Chile and regions of Southeast Asia and Africa. It sees China as a competitor, but also as a strategic partner. Efforts have been intensified to increase exports to China and to attract high value-added technological investment. Agreements are also being explored with other regions such as Latin America, Southeast Asia and Africa. The Minister of Economy, Carlos Cuerpo, has defended both the transatlantic relationship with the US and the opening towards new partners, stressing that a balanced policy is essential to face a volatile international environment. 

Spanish SMEs, especially those with international activity, have been severely affected by the increase in US tariffs: more than 30,000 companies are facing higher costs, regulatory uncertainty and loss of competitiveness

China’s response
China, for its part, reacted to the US tariffs with reciprocal measures, levying duties of up to 84% on US goods and redirecting some of its trade to third countries such as Vietnam and Cambodia. As a result, Chinese exports to the US fell sharply, with maritime shipments dropping by 60-80%. The escalating tariffs between the two powers created major disruptions in global supply chains, and China also tightened its terms with South Korean companies linked to the US defence sector.

However, there have been signs of détente in recent days. On Monday 12 May, China announced a tariff reduction from 125% to 10% on certain US products, while the US will apply cuts from 145% to 30% over the next 90 days. In addition, at talks last weekend in Geneva, the two sides agreed to establish a permanent bilateral consultation mechanism. Since the start of the trade tension, these measures represent a shift towards understanding, albeit temporary, which at least contributes to slowing the deterioration of the relationship and containing wider risks. For the moment, the threat of shortages in the US, surplus production in China, and a flood of Chinese goods into other markets is receding. 

In a nutshell

Ultimately, the global tariff conflict has challenged the fundamentals of the multilateral trading system. The intensive use of tariffs for strategic purposes increases costs, discourages innovation, investment and harms global trade. Europe, in its attempt to maintain the balance between the US and China, faces complex choices. The path of negotiation remains the priority, but the use of retaliatory measures is not ruled out if no progress is made. In addition, the European Central Bank (ECB) is cautiously watching the persistent 2.2% inflation in the eurozone, exceeding its 2% target, and is considering further interest rate cuts to counter the effects of US tariffs, thus conditioning monetary policy decisions in the region. The situation continues to evolve, and the outcome will depend on the political will of the parties to reach lasting agreements that guarantee the necessary stability in international trade.