USA – EU: A Game of Tariff Ping-Pong

The initial shock over the announcement of new tariffs has passed. Who will lose now, and who — not so much?

«Give us back the Statue of Liberty» — suggests MEP Raphael Glucksmann, a potential candidate for the next president of France. Frédéric Auguste Bartholdi’s monumental work was presented to the freedom-loving American people by their French counterparts on the 100th anniversary of the signing of the U.S. Declaration of Independence.

Whenever tariff wars begin, there are some absurd turf battles. When the Franco-American conflict flared up over the construction of submarines for Australia, American lawmakers refused to eat French fries in the cafeteria — despite the fact that the Belgians had actually invented them. It was, of course, a perfect display of utter absurdity.

In the chronology of the current war, you have to start with European steel and aluminum, on which Trump imposed a 25 percent tariff in mid-March. In reality, European exports of these metals to the United States account for only 2 percent of the total volume.

In 2018, during Trump’s first term, he had already imposed similar tariffs — 25 percent on steel and 10 percent on aluminum — but, according to Eurostat, the blow to the European economy was relatively mild and it coped well.

«Europe is selling aluminum ingots to America — a product they don’t produce themselves», says Cyril Mounier, CEO of Aluminium France. «It’s still cheaper for them to buy from us, even with the tariff, than to build their own plants».

Next, Europe responded to the metal tariffs with tariffs on American bourbon, Harley-Davidson motorcycles, and women’s lingerie. To be fair, Harley isn’t always in the top ten best-selling motorcycles in Europe; after all, European dandies can ride Italian Ducati, Aprilia, or German BMW.

The point is that Harley Davidson motorcycles are assembled in Wisconsin and Pennsylvania — two swing states whose victories, especially in Pennsylvania, helped secure Trump’s seat in the White House. This measure is more of a symbolic gesture by the US government than a serious economic move. Moreover, in the EU, Harley bikes come from a factory in Thailand — something that seems to have escaped everyone in that supply chain.

The same goes for women’s lingerie — what kind of war element is that? This refers to the American company Victoria’s Secret. The scheme is the same as with motorcycles. After all, French women can always opt for the elegant Chantal Thomass, and no one will be worse off.

During the previous trade war of 2018–2021 — in the era of Trump-1 — Brussels imposed tariffs of 25 percent on whiskey and bourbon, and exports of American distilleries fell by 20 percent, which amounted to 112 million in dollars. When «good» Biden lifted those tariffs, exports increased by 60 percent.

Now American producers of hard liquor are flooding European warehouses with whiskey to get their products out by April 2 and stay on the market. Brussels has announced that bourbon will now face a 50 percent tariff.

Trade sanctions always start small and then grow exponentially. In response, the U.S. has announced that it will impose tariffs on French cheese and wine as of April 2 — the latter at a staggering 200 percent. That hurts even more.

«Last year, France exported 3.9 billion euros worth of wine to the U.S. — a quarter of its total overseas sales», says Nicolas Ozanam, CEO of the French Wine and Spirits Exporters Federation. «But at 200 percent, our business will grind to a halt; the price per bottle will effectively triple».

The total value of alcohol exports from the EU to the US is estimated at $10 billion a year. The Distilled Spirits Council, which represents both producers and distributors, is naturally opposed to the tariffs.

«The tariffs announced by the administration will directly harm not only us, but also farmers, waiters, bartenders, truck drivers and small business owners», the association said in its communiqué.

Another sore spot is European dairy products. Italy, France, the Netherlands and Spain will be hit first and hardest. This is virtually a strategic EU export market to the US: it has doubled in size over the past 10 years. Currently, European farmers are being charged 10 percent, but there is little doubt that tariffs will rise to at least 25 percent — and most likely another 25 on top of the existing 10.

They now have two options: either immediately lower their base prices to remain competitive in the U.S. dairy market — which primarily affects butter and cheese — or seek alternative markets. The Chinese market, for example, has been growing for some time; European «dairy» products now reach there for 600 million euros a year, although local import substitution is on the rise, even though European products are still considered the benchmark, if not the elite.

Several French and European agribusiness giants operate on US soil. They are expected to offset some of the losses, but the market will lose the buyer who specifically seeks French or Italian cheeses made only there — some obscure «Mimolette d’Isigny» that not everyone in France even knows about. Small cheesemakers and cooperatives simply won’t survive such tariffs. Mirror tariffs (on American cheese entering Europe) make no sense in the absence of a mirror market.

During his campaign, Trump repeatedly claimed that Europeans buy less from the US than they sell. In 2024, the trade surplus was $198.2 billion in Europe’s favor — but that’s only for goods. There are also services, and here Europe is clearly in trouble, as it is heavily dependent on the Americans. In services, the surplus is with the US — a fact that is often overlooked. It’s just not profitable.

Europe buys 12 percent of its medicines from the US, while America imports 15 percent of its medicines from Europe. Europeans buy gasoline from across the ocean and sell cars and planes back. After China, the U.S. is the second largest supplier of goods to Europe.

Countries like Germany and Ireland send more than 50 percent of their total exports to the United States. They will undoubtedly suffer more than others. That is why their representatives in the European Parliament are insisting on a united front against the tariffs.

François Villeroy de Galou, the governor of the Bank of France, believes that the tariff war unleashed by the United States is an excellent lesson in scoring an own goal.

«What’s happening in the U.S. is primarily bad news for the American side», he says. «The way Trump’s team sees the economy reminds me of a game of ‘Monopoly’: if one wins, another has to lose. But the economy is above all something built together — an exchange of ideas, products and innovations. Moreover, we are now witnessing an astonishing scenario. Since the beginning of the year, the situation in Europe has improved, while forecasts in the United States remain pessimistic, with some even talking of an imminent recession».

According to France’s top banker, these «swings» will help the European Union counter the American notion that if they just push hard enough, everything will go their way. Certainly, there is no one in the EU who doesn’t understand that Trump is catering to domestic consumers of these ideas.

In four years, it will be necessary to put Vance — or whoever proves to be the most suitable candidate at that time — into power and hold the White House for another term, or even two. To do this, it must be demonstrated in every possible way that the Republican candidate is keeping his campaign promises.