In early 2025, President Donald Trump announced the imposition of a 25 percent tariff on steel and aluminum imports from the European Union, citing concerns over trade imbalances and national security. This move marks a significant escalation in trade tensions between the United State and the European Union and has prompted swift retaliatory measures from the latter. The ensuing trade conflict raises critical questions about the future of transatlantic economic relations and the potential for broader disruptions in the global trading system.​

To understand the impact Trump’s new tariff’s will have, it is first helpful to define a tariff and its use in global trade. Fundamentally, a tariff is a tax placed on imported goods by a country. Foreign companies must then pay this tax when shipping their goods to a country. The most common type is known as an “ad valorem” tariff, which is calculated as a set percentage of the import’s value. These tariffs serve multiple purposes. Like other taxes, they generate some revenue for the government. Many nations have also used tariffs to protect emerging domestic industries by shielding local businesses from foreign competition. Additionally, some tariffs aim to counter unfair trade practices that allow other countries to artificially lower their export prices.

The EU and US do not have a free trade agreement (FTA) and until now have traded under the most-favoured nation (MFN) tariffs they offer to all World Trade Organisation members. Before the trade war, the average US tariff rate on imports from the EU was 1.47 percent, while on EU imports from the US it was 1.35 percent. Based on 2023 trade volumes, full implementation of Trump’s new tariffs would raise the average tariff rate on imports from the EU to 15.2 percent.

The hit for the European economy will depend on the actual tariff rate the US settles on and on the EU’s response. The EU is heavily reliant on exports to the U.S., with key sectors including automotive, machinery, and chemicals. Analysts at ABN AMRO Bank in the Netherlands warn that the tariffs could lead to a substantial decline in EU exports, potentially reducing European GDP by up to 1.5 percent. Germany, the Netherlands, and Italy are among the most vulnerable, given their significant export volumes to the U.S. In response, the EU has announced €26 billion in retaliatory tariffs targeting U.S. goods such as bourbon, motorcycles, and agricultural products. These measures aim to exert political pressure on the U.S. by focusing on industries located in key Republican states.

While the tariffs are intended to protect U.S. industries, they may have unintended negative effects at home as well. The Kiel Institute for the World Economy estimates that the U.S. economy could contract by 0.17 percent as a result of the tariffs, with further losses if the EU’s retaliatory measures are fully implemented. Additionally, American consumers may face higher prices for imported goods, and U.S. exporters could lose market share in Europe.​ The tariffs have also led to a decline in investor confidence, with the U.S. dollar experiencing a significant drop against other major currencies. This depreciation could increase the cost of imports and contribute to inflationary pressures.

​The escalating trade dispute also threatens to undermine the longstanding alliance between the U.S. and the EU leaders, including Italian Prime Minister Giorgia Meloni, have expressed concerns about the tariffs’ impact on transatlantic relations and have called for renewed dialogue to resolve the conflict. Moreover, the trade tensions may have broader implications for global economic stability. As the United States and European Union impose tariffs on each other’s goods, other countries may be drawn into the dispute, leading to a potential fragmentation of the international trading system.

So what are President Trump’s motivations for placing these tariffs on the EU? At the core of Trump’s tariff strategy lies a long-standing adherence to economic nationalism. Rooted in mercantilist thinking, this view holds that national strength is best achieved through the protection of domestic industry and the reduction of trade deficits – no matter the cost to the global economy at large. Trump has clearly views trade deficits not as a byproduct of complex global supply chains but as evidence of exploitation by foreign powers. The EU has long been a target of Trump’s criticism due to its persistent trade surplus with the United States. By imposing tariffs on European goods, the Trump administration aims to level what it views as an uneven playing field and to encourage the reshoring of U.S. manufacturing capacity. 

Trump’s view of global trade as a zero-sum game relates to Richard Hofstadter’s book The Paranoid Style in American Politics. In his book, Hofstadter describes a recurring pattern in American political discourse: a tendency to view complex or unfavorable events as the result of deliberate, conspiratorial actions by powerful foreign or domestic enemies. This style is rooted in a deeply suspicious worldview where the political landscape is seen as a battlefield between the pure and the corrupt, the people and the elites, or the nation and its exploiters. Trump’s tariffs on the European Union reflect this paranoid style by framing US trade deficits with the EU as the result of EU exploitation. Trump’s motivation for tariffs on the EU doesn’t just stem from economic theory or strategic positioning – it’s combined with the worldview that Hofstadter describes. The “paranoid style” helps explain the emotional and rhetorical appeal of Trump’s policies: they frame the world as dangerous, foreign powers as hostile, and America as justified in acting aggressively to defend itself.