It is one of the biggest political stories of the decade: the US president announced the so-called “reciprocal tariffs” against all its trade partners (well, almost all - not Russia 😉).
And then, a bizarre back and forth followed, with a temporary pause.
But the question remains: what would this trade war mean for the EU 🇪🇺🇺🇸?
It is easy to be pessimistic about the economy of the European Union, and no one can really predict the actual politico economic implications.
However, the first estimates point to a much rosier picture.
In the figure below Bruegel aggregated various analyses based on three scenarios: EU-US trade deal (green 🟢), US unilateral tariffs (orange 🟠) and EU retaliatory tariffs (red 🔴).
As you can see in all three scenarios the impact for the EU might actually be quite limited (from 0% to -1% of GDP) while the consequences for the US could be much more severe (down to -2% of GDP and -65% on exports) 🤯.
It seems that the main challenge for the EU would be to contain and mitigate the political impact as some EU regions would suffer much more than others (see Italy and Ireland):
So, the bottom line is:
We might be able to open a bottle of tariff free champagne after all.
But only if we show unity and solidarity in a wild and hostile world 🌍🍾.
Sources:
Bouët, A., L.M. Sall, Y. Zeng (2024) ‘Trump 2.0 Tariffs: What Cost for the World Economy?’ Policy Brief 49/2024, CEPII
Demertzis, M., A. Sapir and J. Zettelmeyer (eds) (2024) Unite, defend, grow: Memos to the European Union leadership 2024-2029, Bruegel
Du, J. and O. Shepotylo (2025) ‘Tariffs and Triumph: The UK’s Edge in a Fractured World’, Insight Paper, March, Centre for Business Prosperity at Aston University
Evenett, S. and F.M. Espejo (2025) ‘Redirecting Chinese Exports from the USA: Evidence on Trade Deflection from the First U.S.-China Trade War’, Zeitgeist Series Briefing 62, Global Trade Alert
Felbermayr, G., J. Hinz and R.J. Langhammer (2024) ‘US Trade Policy After 2024: What Is at Stake for Europe’, Policy Brief 178, Kiel Institute for the World Economy
Goldman Sachs (2024) ‘The euro area is forecast to avoid recession despite Trump tariffs’, Outlook, 25 November
McKibbin, W.J. and M. Noland (2025) ‘Modeling a US-EU trade war: Tariffs won’t improve US global trade balance’, Realtime Economics, 24 March, Peterson Institute for International Economics
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