Trump’s Latest Tariff Threat Is a Wake-Up Call for U.S. Trade Partners
President’s plan to raise tariffs on EU cars shows how little protection trade deals offer
President Trump’s threat to raise tariffs on European cars is a warning for investors and U.S. trading partners that the Iran war hasn’t dissuaded him from his trade agenda or his willingness to strong-arm allies through economic pressure.
Trump said Friday that the U.S. would increase tariffs on European cars and trucks to 25% from the 15% level that was agreed to as part of a preliminary trade deal last summer. He said the European Union wasn’t complying with the deal and that the higher duties would take effect this week.
President Trump accused the European Union of not complying with a trade agreement and said his administration will raise tariffs on cars and trucks from the EU to 25%. Photo: Anna Moneymaker/Getty Images
The move upends a period of relative calm in economic relations between the U.S. and EU, whose annual two-way trade relationship is worth roughly $1.5 trillion. It also highlights how much uncertainty remains for U.S. trading partners months after the administration struck agreements with many of them, and even as global attention has turned to the Middle East.
Beyond the tariff threat on European cars, Trump has publicly floated abandoning a trade deal he signed with Mexico and Canada that is up for review this year. The administration is also working on replacing tariffs that were struck down by the Supreme Court earlier this year. The U.S. is still negotiating details in its agreements with several Asian countries, and recently targeted Vietnam with fresh concerns.
The U.S. is unhappy with how long the EU is taking to follow through on its commitments from the trade deal, including a pledge to eliminate tariffs on U.S. industrial goods. The tariff cuts require approval from the European Parliament to take effect, a process that began last year.
“The White House has always been clear that we expect our trade deal partners, including the European Union, to live up to their agreed-upon commitments,” said White House spokesman Kush Desai. “The President reserves the right to adjust tariffs if other countries fail to honor our trade deals.”
The EU’s trade commissioner held a “substantive discussion” with U.S. Trade Representative Jamieson Greer on Tuesday about the most pressing elements of the trade deal, according to a spokesperson for the European Commission, the bloc’s executive arm.
To be sure, Trump has previously issued tariff threats that he hasn’t followed through on. His latest move could also be linked to frustration with Germany—Europe’s biggest carmaker—over its leader’s recent comment that the U.S. is “being humiliated” by Iran.
But the fresh threat is also a reminder to Europeans and other trading partners of how easily their deals with the Trump administration can be thrown into question.
The uncertainty extends well beyond the U.S.-EU relationship. Earlier this year, Trump threatened to boost levies on South Korea over similar complaints that lawmakers there weren’t moving fast enough to codify their trade agreement with the U.S. South Korea’s parliament later passed a law to implement the country’s investment commitments.
Trump’s team has rebuffed calls from Democrats to get congressional approval for his trade agreements, leaving them only as executive actions. That means the president has more flexibility to abandon the deals or raise tariffs outside of their terms.
Even where Trump has legally binding trade agreements, he has found ways to apply new tariffs. Last year, he imposed levies on Canada and Mexico over their alleged role in fentanyl trafficking despite having signed a pact with the two nations during his first term. Trump has since doubled down with tariffs on steel, aluminum, automobiles and car parts, citing national-security risks. Those measures remain a major irritant as the three nations renegotiate the North American economic pact this year.
Trump is also likely to expand his ability to wield tariffs this year when the USTR finishes trade investigations that are expected to result in new levies to replace the tariffs ruled illegal by the Supreme Court in February.
While Trump’s planned tariffs—set to be imposed under Section 301 of the Trade Act of 1974—require lengthy investigations at the front end, the president has leeway to alter them once in place.
Trump’s ability and willingness to put tariffs on nations that have already agreed to deals with the U.S. raise the specter of further uncertainty for companies and governments.
“Realists knew these trade deals were merely truces,” said Simon Evenett, a professor of geopolitics and strategy at IMD Business School in Switzerland. “Uncertain access to the American market is by design.”
EU legislation to eliminate duties on many U.S. goods has progressed slowly. The process was paused earlier this year after Trump threatened new tariffs over some European countries’ support for Greenland’s sovereignty, and again after the Supreme Court ruling. Trump later called off the Greenland-related tariffs.
The EU is “in the final stages of implementing the remaining tariff commitments,” European Commission President Ursula von der Leyen said during a press conference Tuesday, adding that the bloc is “prepared for every scenario.”
She also pressed the U.S. on its side of the deal, saying an American commitment to cap most levies on the bloc at 15% “is still outstanding.” The U.S. raised tariffs for hundreds of metal-containing products last year in a move some Europeans argue violated the agreement.
The European Parliament has called for safeguards in the legislation that could allow the bloc to suspend the tariff cuts for U.S. products if Trump reneges on his side of the trade deal. Lawmakers and representatives from European governments are due to discuss the legislation Wednesday.
The U.S. tariff threat “demonstrates not only the unreliability of the U.S. side, but also that the safety net demanded by the European Parliament is exactly what’s needed,” said Bernd Lange, the Parliament’s top lawmaker on trade.
French President Emmanuel Macron said the EU has the ability to respond to any new U.S. tariffs. EU officials have previously prepared retaliatory tariffs and discussed using the bloc’s so-called anticoercion tool—dubbed the bazooka—in response to past U.S. threats.
Uncertainty over U.S. tariffs remains a big concern for businesses in Europe.
The costs of additional tariffs on cars and trucks “would be enormous for the German and European automotive industries,” said German auto association VDA.
The American Chamber of Commerce to the European Union, which represents U.S. companies that operate in Europe, said a return to escalating trans-Atlantic trade tensions would harm companies on both sides of the Atlantic.
Both business groups called on the U.S. and EU to stick to the terms of last year’s deal.
Trump’s threat is a reminder that U.S. trade partners need to be ready to respond to new U.S. tariffs—regardless of whether they negotiated a deal, said Ignacio García Bercero, a former EU trade official.
“I think it is very clear that there is going to be a constant threat of instability,” he said.
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