Trump’s New Tariffs Trigger Trade Crisis with EU and China

Massive Tariff Hike Announced by Trump Administration

In a major escalation of international trade tensions, U.S. President Donald Trump has introduced sweeping new tariffs on imports from numerous countries, including key allies and strategic rivals. The announcement, delivered during a press event at the White House, confirmed that all goods entering the United States will be subject to a base tariff of 10 percent starting April 5. For certain nations, the duties will be significantly higher.

The European Union will face a 20 percent tariff on all exports to the U.S., while Chinese goods will be subject to an additional 34 percent surcharge on top of existing tariffs. Countries such as India, South Korea, and Japan are also being targeted with increased rates ranging between 24 and 26 percent. In some extreme cases, like Lesotho and Saint Pierre and Miquelon, tariffs will reach up to 50 percent.

Trump justified the move by claiming that the United States has long been the victim of unfair trade practices. He referred to April 2 as the “Liberation Day” for American industry, stating that the new measures mark the beginning of a “golden era” for U.S. manufacturing.

EU and China Prepare Countermeasures

The European Union has not remained silent in the face of these aggressive trade actions. European Commission President Ursula von der Leyen called the tariffs a “serious blow to the global economy” and confirmed that the EU is finalizing a comprehensive response package aimed at defending the interests of European businesses. She emphasized that if negotiations with the United States fail, retaliatory measures will be implemented without hesitation.

China, also heavily affected, issued a strong statement condemning the U.S. decision and pledged to introduce its own set of tariffs in defense of its economic interests. The Chinese Ministry of Commerce criticized Washington for undermining decades of progress achieved through multilateral trade agreements.

Germany: The Most Exposed EU Economy

Among all EU member states, Germany stands to suffer the most from the newly imposed tariffs. As the largest European exporter to the United States, Germany shipped goods worth approximately €161 billion to the American market last year. Key sectors such as automotive manufacturing, pharmaceuticals, and industrial machinery are particularly vulnerable. These industries are already under pressure due to high energy prices and rising competition from Asia.

The Kiel Institute for the World Economy has modeled several possible outcomes of the tariffs. Even a limited trade conflict could reduce Germany’s GDP by up to 0.2 percent within a year. If the confrontation intensifies, the losses could be much more severe, especially if retaliatory tariffs are also introduced by the EU.

Market Reactions and Global Consequences

Early market reactions have reflected investor concerns. In Tokyo, the Nikkei index dropped by around four percent in the first minutes of trading following Trump’s announcement, although it later partially recovered. Analysts warn that this is just the beginning of a broader financial shockwave that could ripple through global markets.

The new tariffs are expected to raise prices for U.S. consumers, as importers are likely to pass the extra costs along the supply chain. Economists fear the resulting inflationary pressure could further destabilize the U.S. economy, even as domestic manufacturers benefit from reduced foreign competition.

The EU’s Limited Leverage and Strategic Dilemma

Despite the call for retaliation, the EU faces a structural disadvantage in a tit-for-tat trade war. While it exports significantly more to the U.S. than it imports—resulting in a trade surplus of nearly €200 billion—the Union has fewer American goods to target with countertariffs. This limits its ability to apply proportional pressure.

Brussels has already published a confidential list of thousands of U.S. products that could be subject to new duties. Consultations with affected industries are underway, but decision-makers remain cautious. The EU has signaled that it may delay full implementation of retaliatory tariffs to allow time for diplomatic efforts to succeed.

Exploring Alternative Strategies

Beyond traditional tariffs, the EU is examining other tools. One option under discussion is the use of the Anti-Coercion Instrument (ACI), a legal mechanism designed to respond to economic intimidation by foreign powers. The ACI could allow the EU to impose restrictions not only on goods but also on services, investment flows, and even intellectual property rights.

Digital services, especially those provided by American tech giants like Google, Amazon, and X (formerly Twitter), are viewed as potential targets. However, any such move would likely result in collateral damage for European consumers and businesses who depend on these platforms.

Another alternative being considered is the strengthening of trade partnerships with other countries that are also affected by U.S. tariffs. However, given existing trade agreements and political complications—particularly with China—experts are skeptical about the feasibility of rapidly shifting supply chains and export destinations.

Trump’s Broader Trade Vision and Risks

President Trump has presented the tariffs as a patriotic correction of decades-long imbalances. He argues that even close allies like the EU have exploited the U.S. with disproportionately high import duties, hidden trade barriers, and currency manipulation. These claims are not universally accepted, but Trump has continued to frame the issue in stark, combative terms.

Certain goods such as copper, semiconductors, pharmaceuticals, gold, and “strategic minerals” have been exempted from the new tariffs. Notably, Canada and Mexico, two of America’s closest trading partners, are also exempt—although existing tariffs on some of their exports remain in place. Other sanctioned countries like Russia, North Korea, and Cuba are excluded due to pre-existing trade bans.

The White House has also announced 25 percent tariffs on auto imports, adding pressure to Germany’s already strained car industry. Additional levies are being considered for oil and gas imports from countries like Venezuela and potentially Russia, should diplomatic negotiations over Ukraine continue to falter.

A Growing Divide and Uncertain Future

With tariffs on thousands of products now in place or imminent, the transatlantic alliance is facing a critical stress test. European leaders are grappling with how to protect their economies without escalating the dispute further. Meanwhile, U.S. officials have warned that any retaliatory steps will be met with more aggressive countermeasures.

U.S. Treasury Secretary Scott Bessent cautioned other nations against striking back, claiming such responses would only lead to escalation. Still, European leaders argue that failing to respond risks signaling weakness and surrendering long-term economic sovereignty.

As global supply chains reel from these sudden policy shifts, businesses on both sides of the Atlantic are left in uncertainty. Whether diplomacy can prevail remains to be seen, but the current trajectory points toward an extended period of economic friction between the world’s largest economies.