Given the swiftness with which the Trump administration implements election promises, it is "hard to see" how the European Union "could escape the tariff dance," according to an economist, who suggests it won’t take until April before the bloc would feel the economic pain of U.S. levies.
Questions over potential levies on the EU resurfaced recently as U.S. President Donald Trump delivered on his election pledge and announced tariffs on neighboring Canada and Mexico, and China over the weekend.
Eventually, Trump offered reprieves to Mexico and Canada for 30 days but China on Tuesday hit back at the U.S. by imposing tariffs on some imports from the United States, reigniting concerns over the trade war between the world's two largest economies.
"President Trump has focused on Mexico, Canada and China so far, but that is expected to spread to other countries, especially in Europe," said James Knightley, chief international economist at Dutch banking and financial services giant ING.
"The European Union has not (yet) been the subject of the U.S. administration’s tariff announcements. However, President Donald Trump has regularly publicly criticized the EU for running trade surpluses with the U.S.," he added.
On Sunday, Trump hinted the EU could be the next to face tariffs, saying it might happen "pretty soon" as he addressed his country's longstanding trade deficit with the bloc. "They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them," he told reporters.
Furthermore, Knightley suggested that – when looking at the U.S. bilateral trade balances – the country runs the third largest bilateral trade deficit with Germany, after China and Mexico.
Pointing to the "swiftness" with which the Trump administration implements election promises, he said it is hard to see how the EU could escape the tariffs. "In fact, Donald Trump already initiated a comprehensive investigation into U.S. trade relationships. A report of this investigation is due on April 1, 2025. A crucial moment for the EU," he noted.
"However, it won’t take until April before the EU would feel the economic pain of U.S. tariffs. Given that many European (car) manufacturers have production facilities for the U.S. market in Mexico, as part of the near-shoring and derisking strategy of the last four years, U.S. tariffs on Mexico will also harm Europe," he said.
Knightley's remarks came late on Monday as Trump had already talked with Mexican President Claudia Sheinbaum and agreed to pause planned tariffs for a month to allow further negotiations, while Mexico announced plans to deploy 10,000 national guard members to combat drug trafficking.
"Trump’s announcement that tariffs will be delayed a month with Mexico has seen a reversal. Basically, watch this space. We are all closely watching what might happen with the report on global trade and tax practices scheduled for April 1," Knightley told Daily Sabah.
On Monday, major European automakers from Stellantis to Volkswagen saw their shares sliding while the euro also weakened versus the greenback on tariffs news.
Answering the question of whether Trump could eventually backtrack on tariffs if American businesses and consumers feel significant pressures in the coming weeks, Knightley responded affirmatively as he referred to a recent analysis, published by the bank on Jan. 31.
Pointing to the fact that China, Mexico and Canada "in total account for just over 42% of all goods imports into the U.S." – the report, authored by Knightley highlighted to keep in mind that goods are the products that are tariffed, services are not.
"While tariffs should improve the competitiveness of domestic U.S. manufacturers, those with international supply chains will face higher costs while U.S. exporters will fear reprisals from foreign nations," the report said. It noted that 17% of U.S. goods exports go to Canada, 16% go to Mexico and 7% go to China and have totaled $763 billion in the first 11 months of 2024.
"At the same time, much of the cost increase caused by tariffs will be passed onto U.S. consumers," it added.
"The burden will fall disproportionally on low-income households who spend more of their income on physical goods relative to higher-income households who spend more of their income on services and experiences, which aren’t subject to tariffs," the report said.
Trump, himself warned on Sunday that Americans might experience "some pain" from the escalating trade war sparked by his tariffs on Canada, Mexico and China. However, for now, the United States suspended planned tariffs of 25% on Mexico and Canada.
Thomas Altmann from the wealth management firm QC Partners said it was "unclear how things will go in terms of tariffs" after Trump paused the customs duties for an initial period of 30 days following promises from Mexico and Canada to increase border security measures.
"Whether they do go into force in 30 days, or whether Donald Trump wants to extract further concessions from both neighboring countries before then, remains open," Altmann was quoted as saying by Deutsche Presse-Agentur (dpa) on Tuesday.
It is also too early for the European Union to "breathe a sigh of relief," he argued, as Trump has promised to extend tariffs on European goods.
Brussels, until now, had said it hopes to avoid a trade conflict with Trump through negotiation but has pledged to "respond firmly" to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.
Concerning emerging markets, Knightley briefly detailed the potential of Türkiye being targeted with levies, highlighting that the U.S. has a relatively small trade gap with Ankara.
"The U.S. has a relatively small trade deficit with Turkiye, running at minus $1.9 billion in the first 11 months of 2024 – we get full-year numbers later this week. That puts Turkey 37th in terms of the ranking of the size of the U.S. deficit. As such it is not going to be specifically targeted, but obviously if President Trump instigates a minimum global tariff it will be impacted," he suggested.
This view was echoed by Treasury and Finance Minister Mehmet Şimşek, who said Tuesday the authorities do not foresee being the target of U.S. tariffs.
"We are already at a high tariff standard. Therefore, we do not think we will be the target of U.S. tariffs," Şimşek told an event in Istanbul.
Officials, however, have acknowledged that the new U.S. administration has begun to use tariffs as "a powerful policy tool following the elections," as noted by Trade Minister Ömer Bolat on Monday.
"In response to such retaliatory measures, we will continue our efforts to protect our country's interests and achieve our goals," he said.
Analysts suggested earlier that after the announcement of Trump's memorandum titled "America First Trade Policy," which outlines priorities such as addressing unfair and unbalanced trade, his administration and relevant departments would assess and review trade agreements and risks to the national economy, and move forward with decisions such as additional levies on certain countries based for example on a large gap in exchange.
Türkiye, which in recent years had a positive momentum in commercial relations with the U.S., has a relatively balanced trade structure with its major trade partner, the data from the Turkish Statistical Institute (TurkStat) shows.
The U.S. ranked second on the list where Türkiye sends its goods the most between January and December 2024 with nearly $16.35 billion, recent data from TurkStat reveals. On the other hand, the U.S. is the fifth country on the list of Türkiye's leading sources of imports with $16.23 billion in the same period.