US President Donald Trump’s sweeping tariffs are more than just another trade dispute, they signal a fundamental shift in global economic relations that Europe can no longer afford to ignore. Protectionist policies are becoming a recurring feature of international trade, and these tariffs are just one example of the volatility that businesses and industries will continue to face. The immediate challenge is clear: how should Europe respond? But the more important question is: how do we ensure that Europe’s economy is resilient enough to withstand these disruptions, not just today, but in the long term, writes Angelica Donati, president of ANCE Giovani and managing director of Donati S.p.A.
A defining moment for European trade
The transatlantic trade relationship between the EU and the U.S. is one of the world’s most important and deeply integrated commercial relationships, with €1.6 trillion in trade flows in 2023. Over the past decade, EU exports to the US have grown by 44%, reinforcing America as a crucial market for European businesses. Yet, history has shown that this interdependence does not make Europe immune to shifting political agendas and protectionist policies in Washington.
Trump’s tariffs are just one example of how geopolitical uncertainty can disrupt established trade relationships. They threaten to increase costs, weaken competitiveness, and force businesses to rethink their global supply chains. The European Commission estimates that €28 billion in exports will be affected, but the wider implications go beyond trade figures. This is about how Europe positions itself in an increasingly uncertain world.
The immediate impact on Italy and Europe
For Italy, which exported €67 billion worth of goods to the US in 2023, the risks are particularly high. The country’s luxury and fashion brands which rely heavily on American demand, will face tough choices: absorb rising costs, pass them on to consumers, or rethink supply chains. Meanwhile, Italy’s wine and spirits sector, a leader in U.S. imports, could lose a substantial share of its market if tariffs make Italian products less competitive.
Yet, the potential impact extends far beyond any single country. The EU has long been a top supplier of high-value industrial goods to the U.S. and these tariffs signal a deeper rift in transatlantic trade relations.
The automotive sector is expected to be among the hardest hit. The U.S. remains a significant market, accounting for 20% of total EU automotive exports, with European manufacturers shipping €56 billion worth of vehicles and components to the U.S. in 2023. Markets have already reacted: following the tariff announcement, BMW’s stock fell by 2.6%, Porsche by 2.4%, and Ferrari by 4.9%. While firms with North American production hubs, such as Volkswagen, BMW, and Mercedes-Benz, may cushion some of the impact, smaller manufacturers heavily reliant on direct exports face far greater uncertainty.
The steel industry, which is already under strain, faces similar pressure. The U.S. is the EU’s second-largest steel export market, accounting for 16% of total exports. With 3.7 million metric tonnes now at risk, European producers risk being shut out of a key market, forcing excess supply back into Europe. This supply glut threatens to drive prices down further, intensifying competition in an industry already struggling with high energy costs, production cuts, and job losses.
Yet, as Europe struggles with these challenges, the effects of protectionism are beginning to rebound on the US economy itself.
Unintended consequences for the US economy
These tariffs may be designed to shield American industries, but their economic costs are already surfacing.
The U.S. construction sector, reliant on imported aluminium for approximately 50% of its supply, has seen prices skyrocket, with the Midwest aluminium premium hitting a two-year high. Even in steel, where roughly 75% of US demand is met domestically, tariffs have pushed hot-rolled steel prices in the Midwest by 12% in the last two weeks and risen by 20% overall since Trump took office on January 20.
The impact will ripple across industries, from housing and automotive manufacturing to public infrastructure, amplifying inflationary pressures at a time when the U.S. economy remains fragile.
While tariffs are often framed as a tool for protecting domestic industry, history suggests they rarely deliver sustained benefits. Instead, they create higher costs, economic inefficiencies, and unpredictable market distortions, reinforcing a cycle of retaliatory trade policies that ultimately weaken global growth.
Beyond retaliation: The need for a long-term strategy
Europe cannot afford to simply react. Instead of short-term countermeasures, this should be a catalyst for long-term economic restructuring. Europe must first strengthen its industrial base. Reducing reliance on external suppliers for critical raw materials and key manufacturing inputs will make the EU less vulnerable to future trade shocks. Investing in advanced manufacturing, resource extraction, and strategic industries will provide long-term security.
Trade diversification is another key area. While the U.S. will remain an important trading partner, Europe must accelerate the diversification of its global trade partnerships. Expanding agreements with emerging markets in Asia, Latin America, and Africa will reduce over-dependence on any single market and create new growth opportunities for European businesses.
Equally important is reinforcing intra-European trade and industrial cooperation. If European countries collaborate more effectively on supply chains, infrastructure projects, and research, the EU will be better positioned to navigate external trade risks. A stronger, more self-sufficient European economy will be far less vulnerable to Washington’s policy swings.
Yet Europe’s long-term competitiveness will be defined not just by investment in next-generation industries, but by turning those investments into global leadership. While initiatives like NextGenerationEU have laid the foundation, the focus must now shift to accelerating responsible AI adoption, digital transformation, automation, and renewable energy into self-sustaining economic engines. These sectors must move beyond policy ambition and become scalable drivers of economic growth and supply chain resilience.
Europe cannot compete globally while acting as fragmented national economies. Critical challenges – such as the housing crisis, infrastructure investment, and defence spending – require a unified fiscal approach. A common budget and joint debt mechanisms would enable Europe to act with the scale, speed, and efficiency of a single state, ensuring that strategic industries receive the investment and coordination necessary to remain competitive.
Conclusion
Trump’s tariffs are a wake-up call for Europe, exposing the fragility of economic alliances and the resurgence of protectionism. The challenge is not just to respond but to act decisively, bridging the gap between policy ambition and industrial transformation, strengthening supply chains, and ensuring innovation reaches businesses of all sizes. This moment demands more than defensive measures; it requires a unified, long-term strategy that positions Europe as a global economic leader. Europe must act now to shape its future, or risk having it shaped by others.
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EU Reporter publishes articles from a variety of outside sources which express a wide range of viewpoints. The positions taken in these articles are not necessarily those of EU Reporter. This article was produced with the assistance of AI tools, with final review and edits conducted by our editorial team to ensure accuracy and integrity.
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