US-EU trade talks and tariff implications

The week in summary 

On Wednesday 26 March, President Trump signed an executive order imposing 25% tariffs on imports of foreign-made cars starting April 2. The tariffs will also apply to car parts and are intended to encourage car manufacturing within the US. President Trump stated that these tariffs are permanent and will not be removed.

The tariffs will impact cars from countries not covered by the United States-Mexico-Canada Agreement (USMCA). While car parts from Canada and Mexico are initially exempt, the tariffs will be applied to the non-US value of these parts once US Customs and Border Protection establishes a system to assess the duties, according to the White House. The White House claims the tariffs are necessary for national security, as the US car industry is vital and has been undermined by excessive imports.

Carmakers have expressed concerns that the tariffs will disrupt supply chains and increase prices for US consumers. Shares of major car manufacturers, including General Motors, Ford, and several Japanese automakers, fell following the announcement.

The tariffs could significantly affect Mexico's economy, which heavily relies on car exports to the US. Canadian and European leaders have criticized the move, with the EU considering retaliatory measures. The United Auto Workers union supports the tariffs, believing they will help fix trade deals.

On Monday 25 March, President Trump also imposed a 25% additional tariff on countries purchasing oil or gas from Venezuela, leading to an increase in oil prices. Shortly after announcing these new tariffs, which target buyers such as China, Trump remarked, “They’ve charged us so much that I’m embarrassed to charge them what they’ve charged us, but it’ll be substantial”.

President Trump is also planning a two-step tariff regime, starting with emergency duties while investigations into trading partners are ongoing. This approach aims to establish a stronger legal basis for his "reciprocal" tariffs and generate revenue for planned tax cuts. Trump has set April 2nd as the date to announce these broader tariffs, calling it “Liberation Day”. He has also indicated that while substantial tariffs will be imposed, some countries might receive exemptions.

EU Reaction

Following the announcement by President Trump on the imposition of tariffs on foreign-made cars, European Commission President Ursula von der Leyen responded quickly, stating: 

“I deeply regret the US decision to impose tariffs on European automotive exports. Tariffs are taxes — bad for businesses [and] worse for consumers equally in the US and the European Union.”

Further to this, President von der Leyen outlined that the EU is prepared to retaliate, where required, advising “The EU will continue to seek negotiated solutions, while safeguarding its economic interests,” and “As a major trading power and a strong community of 27 Member States, we will jointly protect our workers, businesses and consumers across our European Union.”

EU and US trade talks

The European Union's Trade Commissioner, Maros Sefcovic, met with top US trade officials yesterday to try to prevent steep tariffs on EU goods coming into force next week, but the outcome of the talks remains unclear. Sefcovic described his discussions with US Commerce Secretary, Howard Lutnick, US Trade Representative, Jamieson Greer, and White House economic adviser, Kevin Hassett, as “substantive”.

Despite two previous meetings, President Trump’s plans to raise US import duties to match those of major trading partners and counteract non-tariff barriers remain unchanged. Sefcovic emphasised the EU's commitment to achieving a fair and balanced deal, rather than facing unjustified tariffs, in a post on X, stating, “We share the goal of industrial strength on both sides”.

EU officials have struggled to dissuade Trump from initiating a trade war, as he pursues a multi-front tariff strategy likely to provoke strong retaliatory measures. Sefcovic noted last week that little progress had been made in talks with Washington after Trump imposed 25% tariffs on steel and aluminum imports earlier this month.

In an effort to prevent a full-scale trade war, European Commission officials announced the suspension of planned tariffs on certain US products, including Bourbon whiskey, which were set to take effect from the start of April. 

The European Commission's move aims to de-escalate tensions and avoid further economic conflict between the EU and the US.

Industry Analysis

PwC's US Tariff Industry Analysis indicates that total tariff measures could increase from $76 billion to nearly $697 billion annually, not accounting for countermeasures or company adjustments. Key sectors affected include industrial products, consumer products, automotive/aerospace, pharmaceuticals, life sciences, medical devices, technology, media, telecommunications, energy, utilities, resources, and private equity.

For a more detailed review of this area see PwC’s US Tariff Industry Analysis: How Trump's tariffs could impact US companies.

Irish Reaction

President Trump announced that the US will introduce tariffs on pharmaceuticals, specifically mentioning Ireland as a major producer. The aim is to bring the pharmaceutical industry back to the US, as President Trump claims the country currently does not produce many drugs domestically. He noted that many pharmaceuticals are made in China and Ireland, and while he praised Ireland, he emphasised the need to shift production back to the US:

Minister for Finance, Paschal Donohoe, has indicated that the US is likely to impose significant tariffs on the EU in early April, despite ongoing negotiations to prevent this. These tariffs could potentially impact tens of thousands of jobs in Ireland and hinder planned tax cuts. US tariffs could affect up to 80,000 jobs in Ireland in “worst case scenario”, Donohoe said. The Minister for Finance also emphasised that while efforts are being made to avoid the tariffs, the probability of their implementation remains high stating, 

The Economic and Social Research Institute (ESRI) has warned that US tariffs could cost Ireland over €18 billion in lost trade and pose a long-term risk to public finances. If the US imposes 25% tariffs on all EU exports and the EU retaliates, Ireland's GDP could be 3.7% lower over the next five to seven years, equating to €18.4 billion. This impact is significant, given Ireland's dependence on trade with the US for employment, tax receipts, and exports.

At a trade forum held in Government Buildings, Tánaiste Simon Harris addressed business leaders, cautioning them about potential "significant disruption" in early April. He emphasised the seriousness of the situation, indicating that the government is preparing for possible challenges.

Key Upcoming Dates 

With the recent announcements on tariffs and the expected announcement of reciprocal tariffs, April 2nd or “Liberation Day” as stated by President Trump, is the key upcoming date to be aware of. With the first reports under the “America First Trade Policy” and the first review under the reciprocal tariff plan due on April 1st, the coming week is poised to be one of the most important yet in respect of US tariff measures.

Key actions businesses can take today

US import tariffs on EU goods now appear to be an imminent reality. Key actions that can and should be taken include:

• Assessing your customs data to understand your exposure;
• Determining the customs origin of goods shipped to the US to see if they are considered EU-originating; and
• Gaining oversight of the end-to-end supply chain, including having the right data, to assess the impact on material sourcing and exposure for tariffs on component parts.