FILE PHOTO: A worker welds a steel tube at HCC, a company that uses parts to make combines, at the factory in Mendota, Illinois, U.S., February 21, 2025.
Vincent Alban | Reuters
European consumers face higher prices on items from cars to jeans, while major industries including steel, retail and agriculture grapple with reduced competitiveness and operational cost increases as trade tensions between the White House and Brussels heat up.
On Wednesday, the European Commission announced it would retaliate to U.S. President Donald Trump’s newly imposed — but long-threatened — 25% blanket tariffs on aluminum and steel imports into the United States.
The EU’s retaliatory measures are set to hit 26 billion euros ($28.3 billion) worth of goods as the new U.S. tariffs will apply to $28 billion worth of European goods.
EU officials have drafted a 99-page document, seen by CNBC, listing specific American items that are under consideration for tariffs in Brussels. It includes a wide range of goods, from agricultural produce, household items and plastics to alcohol and fashion garments, along with steel and aluminum and their derivative commercial products.
Trump on Wednesday suggested more U.S. counter-measures could follow, stating that he would respond to the EU’s action and that “whatever they charge us with, we’re charging them.” A further twist came Thursday, as Trump threatened a 200% tariff on wine, champagne and other alcoholic products coming out of France. The president has previously suggested he could implement a blanket 25% tariff on EU imports, slamming the bloc for alleged unfair trade practices.
Citi analysts said in a Wednesday note that there was unlikely to be a major, immediate macroeconomic impact from the announced EU duties, since the targeted goods represent only about 5.5% of the region’s non-energy imports from the U.S. — but that there could be indirect impact through increased business and consumer uncertainty.
Swift price impact
The European sectors about to be swept up in the whirlwind of trade tensions include automotives — already being rocked by the fresh duties between the U.S., Canada and Mexico — metals, construction, spirits, luxury goods, consumer goods, retail, food producers, agriculture and pharmaceuticals.
The EU’s tariffs will push up costs for a “raft of manufacturers, not least automakers and food producers,” said Susannah Streeter, head of money and markets for Hargreaves Lansdown, highlighting everyday items such as a can of coke or a tin of beans.
“There is only so much manufacturers can absorb, and car giants look set to be faced with the double whammy of higher costs and ultra cautious consumers, unwilling to splash out on big ticket items amid the uncertainty,” she added.
The impact on consumers will be swift as businesses pass on higher costs to support margins, according to Stuart Katz, chief investment officer at wealth management firm Robertson Stephens, who forecast price increases would be visible by the time EU measures take effect on April 1.
“EU tariffs on U.S. grains, such as corn and soybeans, may disrupt animal feed supplies, negatively impacting the EU livestock sector’s competitiveness. This sector is vulnerable due to their limited ability to develop in the near term reliable supply chain alternatives for mitigating tariff impacts,” Katz told CNBC.
“The broader impact includes disruptions to supply chains and economic uncertainty for industries reliant on U.S. imports. Key sectors like steel and agriculture may face higher operational costs, reduced competitiveness, and potential job losses.”
That all comes while the new U.S.-imposed tariffs on steel and aluminum imports from the EU disrupt supply chains and cause losses for European producers, Katz said, adding that U.S. tariffs on products like French cognac and cosmetics may jeopardize exports and jobs. Trump tariffs could in future also target EU pharmaceutical exports which are critical for countries such as Ireland and Denmark who rely upon trade with the U.S., Katz said.
Corporate hit
In a statement on Wednesday, trade body spiritsEUROPE slammed the EU’s retaliation to Trump’s tariffs.
The organization, whose members include 30 national associations and major companies such as Johnnie Walker-maker Diageo and Jack Daniel’s producer Brown-Forman, said the news came at a “difficult time for the spirits sector,” which was seeing a “marked slowdown in many key markets.”
It warned that if implemented on April 1, EU tariffs on U.S. spirits would “have a hugely damaging impact on the EU companies that produce U.S. spirits [and] U.S. companies that are heavily invested in Europe … putting at risk the many jobs they support.”
In sectors such as luxury goods and retail, the corporate impact will largely depend on the specific company and its supply chains, Jie Zhang, luxury sector analyst at AlphaValue, told CNBC.
Luxury products are directly impacted by higher tariffs between the EU and U.S. because they are frequently made in Europe. Even where a supply chain originates in Asia, the final product is often stocked and shipped from Europe, Zhang said, adding that a company like Louis Vuitton has a production site within the U.S., where it generates around half of local revenue.
Likewise, Zhang said, a retailer such as Zara owner Inditex will be protected by its business model, with over half its sourcing and production for goods done in neighboring countries. However, a company like online retailer Asos has much of its supply chain in Asia and has limited flexibility, as well as significant exports to the U.S. market which will be impacted.
Uncertainty reigns
Amid intense political wrangling, there is still a possibility that tariffs are dropped, reduced or intensified.
Stressing that the bloc “deeply regrets” the Trump administration’s approach to trade, European Commission chief Ursula von der Leyen noted on Wednesday that the EU remains “ready to engage in meaningful dialogue” with the U.S.
“For U.S. stocks, it’s businesses involved in the consumer and industrials sectors that will be most impacted, with the reality of the situation being that a substantial hike in the prices of many of these goods in Europe will simply force consumers there to purchase alternatives from within the euro zone or elsewhere,” Michael Field, chief equity strategist at Morningstar, told CNBC.
“For European stocks, the more worrying part of the equation is what is next. It’s highly likely the U.S. will retaliate, imposing a wider range of tariffs on European goods. European auto manufacturers should be concerned, as should chemical makers, as well as consumer firms in spaces like alcohol.”
Russ Mould, investment director at AJ Bell, noted that for investors, it was very difficult to establish how tariffs would play out in reality. He suggested that the best strategy may be to not try to second-guess them, sticking to robust balance sheets and strong competitive positions.
“Defence stocks are still rising, and industrials including renewables are generally doing well, perhaps in the view that Europe will need to re-tool and increase self-sufficiency in many areas and parts of the supply chain,” he told CNBC.
“By contrast, retailers, sports gear sellers, luxury goods plays and pharma stocks are lagging.”
