What EU goods could be hit by US tariffs?

EU leaders gathered in Brussels for a meeting on Monday, with the threat of US tariffs on European industry looming large.

US President Donald Trump's actions since returning to the White House, following through on his threat to impose tariffs on Canada, Mexico and China, have caused alarm in Europe.

Now his gaze has turned across the Atlantic. The EU runs a trade surplus with the US, which means it exports more than it imports. Mr Trump has suggested he might target Europe's car and food sectors, calling the bloc an “atrocity” on trade. "They don't take our cars, they don't take our farm products, they take almost nothing and we take everything from them – millions of cars, tremendous amounts of food and farm products" Mr Trump has said.

As the leaders met to discuss defence, a possible trade war with the US is at the forefront of their minds.

French President Emmanuel Macron warned that the EU must show its muscle if Mr Trump makes good on his threats. "If we are attacked in terms of trade, Europe as a true power will have to stand up for itself and therefore react," he said as he arrived in Brussels.

The EU's foreign affairs chief, Kaja Kallas, spoke of a two-way transatlantic trade relationship as she arrived at the leaders' summit. "We need America, and America needs us as well," she said. "Tariffs increase costs. They are not good for the jobs, not good for the customers either." China would be the only winner of a trade war between the EU and the US, she added.

Meanwhile, Chancellor Olaf Scholz of Germany, the EU's largest economy which is highly reliant on exports, said the bloc could respond if necessary with its own tariffs against the US but stressed it would be better for the two parties to reach a trading agreement.

World's biggest trade relationship

The US and the EU have the biggest trade relationship in the world – together, they represent about 30 per cent of global trade and 43 per cent of the world's GDP. In 2023, transatlantic trade in goods and services exceeded €1.5 trillion ($1.54 trillion). Meanwhile, more than 10 million people are employed by US-European companies and their affiliates, doing business on both sides of the Atlantic.

Germany is among Europe's three largest exporters to the US, alongside Italy and Ireland. Machinery and mechanical appliances represent its top export to the US, followed by chemicals, plastic, rubber and leather goods. Italy exports mostly machinery and fashion products. For Ireland, trade with the US is particularly important. Irish exports to the US represent close to 46 per cent of its non-EU exports, with the US buying mostly pharmaceutical products and chemicals. In terms of the percentage of national exports that leave the EU, Ireland is followed by Finland at 25.5 per cent and Austria at 23 per cent.

The US is also the number-one destination for European vehicles. In 2023, car exports to the US accounted for 20 per cent of all exports, to the tune of €56 billion. The industry employs 13.8 million people, leaving the industry "highly vulnerable" to tariff threats, according to Oxford Economics. "Any disruption to this key industry would have significant implications for the broader European economy," it said in a blog post last month.

European agri-food products, which represent 12 per cent of all exports to the US, are another major sector that may be affected by new tariffs. The sale of products such as cereal preparations, dairy and wine were worth €27.2 billion in 2023, according to the European Commission. European chocolate, olive oil and cheese are among high-value products bought by the US. However, exports of alcoholic spirits and liqueurs to the US decreased by 27 per cent in 2022. In return, the EU's primary purchases in this sector from the US include nuts, cereal and animal feed.

But the tariff troubles for many European companies could start as early as Tuesday. The levies on Mexico and Canada will hit European car makers Volkswagen and Stellantis almost immediately. The two companies have sizeable manufacturing plants in Mexico and sell the cars they make there across the border in the US. Analysts at investment bank Stifel said 65 per cent of the cars that Volkswagen sells in the US would no longer be competitive once the tariffs come into force.

Much is at stake. For example, last year VW's Audi subsidiary made nearly 176,000 cars at its plant in San Jose Chiapa in Mexico, with almost all destined for export to the US. On top of its operations in Mexico, Volkswagen is also building a battery gigafactory in Ontario, Canada. It will invest up to $4.9 billion in the project, which is expected to start production in 2027 and will provide batteries for EVs in the North American market.

Shares in Volkswagen and Stellantis were both about 6 per cent lower on Monday morning, Volvo Cars, Mercedes Benz, BMW, Porsche all fell between 3.4 per cent and 5.2 per cent in early trading. Meanwhile, shares in French car parts supplier Valeo slumped by 7 per cent.