The tug of war between the United States and the European Union has begun. On March 12, the US administration raised tariffs on imports of aluminum and steel by 25%. In response, the EU has announced that it will reinstate, in mid-April, tariffs introduced during Donald Trump's first term, suspended since 2020. Tougher retaliatory measures will be imposed on the same date. There is no doubt that they will be adapted to the reciprocal tariffs that the United States wishes to impose on its trading partners, the contours of which are supposed to be unveiled on April 2. Targeted sanctions, industry by industry or even product by product, cannot be ruled out.
The chart presented here shows which industries in Europe seem to be the most exposed. The green sticks represent the share of the U.S. bilateral trade deficit with the EU attributable to each product. The orange markers represent the differential in tariffs imposed by the two trading partners on each other, with a positive figure indicating a higher level imposed by the EU. These tariffs are trade-weighted, meaning they take into account the structure of exchanges between the two blocs.
The sectors targeted by the US administration may be obvious on this chart: the car and pharmaceutical industries, which alone account for just under half of the US bilateral deficit in 2024. For the pharmaceutical sector, the United States is the most important export market, with nearly 17% of exports going across the Atlantic in 2024. Dependence on the American market makes this sector particularly vulnerable to Washington's decisions.
Yet, this sector does not impose higher tariffs than its American partner; The differential is even slightly negative. Some European industries, such as automotive, spirits and chemicals, impose higher tariffs than their American competitors, but overall, the tariff gap between the two partners is negligible. In addition, the European VAT, considered as a non-tariff measure by the Trump administration, applies uniformly to all EU trading partners and Europe-based companies. Therefore, the argument that the US trade deficit with the EU is the result of unfair trade policies does not hold.
Moreover, taxing European imports more heavily would have direct repercussions for American companies, that have a strong presence on European soil – this is the case, for example, with pharmaceutical companies in Ireland.
These two economies are deeply intertwined, and further trade sanctions are likely to cost both sides dearly, even if the EU seems to have the means to cushion the shock, thanks in particular to the size and scope for deepening its internal market.
