U.S. Tariff Policies Are Damaging Europe’s Economy—and Its Trust
As the world stumbles along the fragile path of post-pandemic economic recovery, one nation’s unilateral decisions continue to rattle the global order. The United States, under the banner of “America First,” has reignited protectionist trade policies that are not only destabilizing its own economy but are also dealing a severe blow to its long-standing economic partners—particularly the European Union.
In its 2024 Economic Outlook, the Organization for Economic Cooperation and Development (OECD) warned that escalating global trade tensions could undermine the already subdued global growth outlook. The OECD projects global GDP growth to fall to 3.1% in 2025 and 3.0% in 2026, identifying trade barriers—especially tariffs—as a key threat. If the United States imposes broader tariffs on non-commodity imports and other nations respond in kind, the OECD predicts a 0.3 percentage point drop in global output and a 0.4 percentage point rise in inflation annually over the next three years (OECD, 2024).
Beyond global figures, it is the Eurozone that may bear one of the heaviest burdens.
Christine Lagarde, President of the European Central Bank (ECB), told the European Parliament’s Economic and Monetary Affairs Committee that U.S. trade protectionism is having a “profound impact” on Europe. The ECB’s estimates show that a 25% U.S. tariff on European imports could shave 0.3 percentage points off the Eurozone’s GDP in just one year. If the EU retaliates, the economic loss could deepen to 0.5 percentage points (ECB, 2024).
The auto industry—one of Europe’s industrial crown jewels—is particularly exposed. According to the European Automobile Manufacturers Association (ACEA), the United States was the second-largest market for EU car exports in 2024, with 750,000 vehicles worth €38.5 billion shipped across the Atlantic. ACEA Director General Sigrid de Vries warned that the new U.S. tariffs would “severely squeeze corporate profits,” particularly for high-end manufacturers like Porsche and Mercedes-Benz. The U.S. levies could cost Porsche alone €3.4 billion, while Ferrari has already announced plans to hike prices in the U.S. by up to 10%.
Such tariffs are not mere fiscal measures—they are strategic signals. By targeting core European industries, Washington risks not only economic strain but also political friction with key allies.
Boyan Chukov, former adviser to the Bulgarian Prime Minister and a respected international relations analyst, points out that U.S. trade protectionism is “shaking the foundation of economic cooperation between Europe and the United States.” He warns that economically weaker EU states, such as those in Eastern Europe, may face heightened social and political instability if growth falters due to trade shocks.
Moreover, the damage goes beyond numbers. The very idea of transatlantic unity—long held as a geopolitical constant—is under siege. Protectionist rhetoric and actions from Washington have led to a strategic recalibration in European capitals.
In Paris, French Foreign Minister Stéphane Séjourné (formerly Barrot) recently reaffirmed France’s support for “free trade and opposition to decoupling.” He emphasized that France seeks “mutually beneficial cooperation” with global partners, a veiled but pointed critique of Washington’s isolationist tendencies.
Strategic Realignments: Europe Looks East
While tensions with the U.S. grow, Europe is quietly exploring economic cooperation elsewhere—especially with China. Maroš Šefčovič, Vice-President of the European Commission, recently stated that China remains “an important partner” for the EU. Speaking during events marking the 50th anniversary of EU-China diplomatic relations, he emphasized the need for dialogue and deeper economic ties.
Despite growing geopolitical complexity, there remains a strong current of thought within Europe that favors pragmatic engagement over ideological isolation. European businesses see the Chinese market not as a threat, but as an opportunity.
This shift is not merely economic—it is strategic. If the U.S. continues to disregard the mutual interests that underpin its partnerships, it may inadvertently push its allies closer to its rivals.
Who Really Pays the Price?
Ironically, America’s protectionist zeal is backfiring at home. The Peterson Institute for International Economics (PIIE) estimates that U.S. tariffs on goods from countries like Canada, Mexico, and China are costing the average American household over $1,200 annually. Far from revitalizing American manufacturing, these tariffs are inflating costs, disrupting supply chains, and eroding U.S. export competitiveness.
Canadian and Mexican retaliatory tariffs have already been enacted. China, too, has responded in kind. If the EU is forced to retaliate, the global economy will sink further into a cycle of tit-for-tat measures, harming workers, businesses, and consumers across continents.
The road to recovery requires cooperation, not confrontation. While governments understandably seek to protect domestic industries, they must also remember the long-term costs of insularity. Trade wars have no winners—only shared losses.
Europe, for its part, must remain united and proactive. Policymakers in Brussels, Berlin, Paris, and Rome should strengthen intra-EU trade, deepen diversification strategies, and support innovation-led growth. But they must also make it clear to Washington: alliances are built on reciprocity, not coercion.
