As trade tensions between the European Union and the US reach a critical point, the EU is preparing a second wave of retaliatory tariffs targeting billions of dollars in US exports each year. This move comes amid stalled negotiations and the looming threat of the US imposing steep 30 per cent tariffs on nearly all EU goods starting August 1.
Caught off guard by the sudden threat of these duties, the European Commission swiftly responded with plans to impose counter tariffs on US exports valued at EUR 72 billion, a measure that could also impact the EU’s own economy.
With both sides gearing up for a potential trade showdown, the stakes are higher than ever for industries on both continents.
What is the EU’s second retaliatory tariff package?
The European Commission has tabled plans to impose counter tariffs on US goods valued at approximately EUR 72 billion, following the earlier proposal targeting EUR 95 billion. This revised list focuses on specific US industrial products, such as aircraft and aircraft parts, machinery, automotives, chemicals, plastics, and medical equipment.
These measures are designed as retaliation against US tariffs on steel, aluminium, and cars, aiming to pressure Washington amid ongoing trade talks. The Commission initially proposed tariffs on USD 110 billion worth of US exports, but the package was trimmed to USD 84 billion after consultations with EU member states and industry groups.
EU downstream aluminium exports to the US in 2024
In 2024, the EU exported approximately 112,241 thousand tonnes of downstream aluminum to the US The contributing countries were Austria, Belgium, France, Germany, Greece, Italy, Sweden, and Spain.
Aviation: the most vulnerable sector
Aviation, where aluminium is a primary need, stands out as one of the hardest-hit sectors, with potential import restrictions on US aircraft and parts valued at nearly EUR 11 billion. Ireland, France, the Netherlands, and Germany top the list of countries importing these goods.
The sector’s complexity is underscored by close cooperation between US and European aerospace giants. For example, French firm Thales supplies Boeing and Airbus with critical flight management systems, while US based Honeywell provides components for Airbus planes.
This interdependence means EU tariffs will also deal a blow to Boeing, which generated over USD 8.7 billion in revenue from Europe in 2024, about 13 per cent of its total income. Ireland’s unique role, managing 37 per cent of the global commercial aircraft fleet through leasing companies, further intensifies its exposure. A recent report by aviation investment group Irelandia highlights Ireland as one of the EU’s most vulnerable economies in this dispute, alongside Germany.
Brussels think tank Bruegel estimates Ireland could face a cumulative GDP loss of 3 per cent by 2028 due to the ongoing tariff battle.
Automobiles: rising costs and market uncertainty
The automotive industry also faces significant disruption. The second EU retaliation is expected to impose tariffs on US-sourced aluminium, a vital material for lightweight car parts such as body panels, wheels, and engine blocks. This will inevitably raise production costs for European automakers dependent on these imports.
If the EU’s retaliatory tariffs include American-made cars or automotive components, vehicles from brands such as Ford, Tesla, and GM could become less competitive in the European market, as higher import costs would likely lead to increased prices.
Moreover, the prospect of additional US tariffs, up to 30 per cent on EU vehicle imports further clouds the outlook, potentially causing manufacturers to delay investments, shift production locations, or reduce exports.
Industrial machinery: economic pressure points
Machinery, which relies heavily on aluminium components, is also in the EU’s target, with EUR 9.43 billion worth of US imports potentially facing tariffs. This raises the risk of significant supply chain disruption in countries like Germany, the Netherlands, France, and Ireland. Due to the sector’s deeply integrated nature, even EU countries with limited direct imports from the US could feel the impact through supply chain ripple effects.
Vehicles and parts constitute the third-largest group affected, with Germany and Belgium being the most exposed. Germany alone imports nearly EUR 7.5 billion in vehicles or parts from the U.S., putting intense pressure on its automotive sector.
Analyst Fennessy notes, “Even if countries have a limited direct import exposure to the United States, there can be significant spillovers to other countries simply down to the close supply chain integration and the impact on adjacent support industries due to tariffs.”
In Germany, any temporary price hikes or supply disruptions could further strain major carmakers like Volkswagen and Mercedes, which have extensive manufacturing operations across central and eastern Europe.
The stakes for Europe and the US
The EU’s strategic retaliatory tariffs highlight the significant stakes for both sides of the Atlantic. Designed to shield European industries from US tariffs on steel, aluminium, and automobiles, these measures also carry the risk of disrupting critical supply chains and impacting closely linked sectors like aerospace and automotive.
_md.webp)
