US EU Trade War Escalates: Trump Tariffs Hit European Exports Hard with 50% Rates on Key Industrial Sectors
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US EU Trade War Escalates: Trump Tariffs Hit European Exports Hard with 50% Rates on Key Industrial Sectors
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After months of negotiation, the US and European Union announced a new trade truce in July. According to a White House fact sheet and reporting from Al Mayadeen, this agreement sets a 15% tariff on most EU goods entering the United States, including autos, auto parts, pharmaceuticals, and semiconductors. However, higher sectoral tariffs remain unchanged for European steel, aluminum, and copper—these products still face a punishing 50% tariff rate. As a result, sectors like machinery and vehicles, which make up nearly 40% of EU manufactured exports to the US, are facing serious disruption. According to the German Mechanical Engineering Industry Association, about 30% of US machinery imports from the EU are now hit with the higher 50% tariffs, undermining the initial optimism around the 15% cap.
The tariff formula complicates business: a typical million-dollar machine export from Europe with 20% steel content is taxed at 50% on the steel portion and 15% on the rest, leading to effective rates as high as 22%. Companies like Krone Group have already halted shipments bound for the US and sent workers home, while giants like John Deere are scrambling to adjust production costs and pricing structures. Bureaucracy is mounting as firms must now document the metal content of tens of thousands of components in every machine they ship across the Atlantic. These challenges add up in an already tenuous environment, with the $1.5 trillion transatlantic trade relationship hanging in the balance.
Politically, this truce lacks solid enforceability and congressional backing, making it highly vulnerable to sudden reversal. Trump’s trade policy, widely described as unpredictable, continues to threaten stability. Just this week, Trump threatened additional tariffs on the EU in response to a €2.95 billion antitrust penalty imposed by the European Commission on Google. This move, announced on Truth Social, frames EU regulators as unfairly targeting US tech firms. Trump hinted at leveraging Section 301 of the Trade Act to investigate and possibly impose new restrictions if the US deems its companies are targeted unfairly. Though this dispute is technically separate from the broader tariff regime, it increases uncertainty for both markets and manufacturers.
If you’re watching for signs of détente, it’s worth noting that while the EU removed most of its tariffs on American exports such as aircraft and chemicals, the climate remains tense. The US is insisting on strict rules of origin to block third-country goods from slipping in through Europe. Real-world wins have so far been limited to US energy and LNG exports, but supply chain headaches and shifting production have become the new normal for European industry.
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