'Tit-for-tat' trade war will leave both EU and US 'weaker' and 'poorer'

Since retaking the White House, US president Donald Trump has imposed a series of tariffs on the country's closest trading partners. 

A “tit-for-tat” trade war between the US and Europe will leave both regions “weaker, poorer, and less able to address other major challenges” such as geographical tensions and the challenge coming out of China, a new report supported by the American Chamber of Commerce has found.

The report comes amid rising tensions between the EU and the US after president Donald Trump began imposing tariffs on various international trading partners.

In a new study, supported by the American Chamber of Commerce in the EU, researchers at the Johns Hopkins University’s Foreign Policy Institute and the Transatlantic Leadership Network, found that US-Europe relationship represents the largest commercial partnership in the world and “neither party has an interest” in being caught in the escalatory spiral of a “tit-for-tat trade war that would harm both economies”.

EU-US trade

The study said the estimated value of the economic ties between Europe and the US to be $9.5 trillion (€8.7tn) during 2024 - up from $8.7tn the previous year. This figure comprises an estimated record $2tn in goods and services trade between Europe and the US and $7.5tn in combined affiliate sales.

European-US goods trade reached a value of $1.3tn during the year, of which $976bn was trade with EU member states.

The value of the US goods trade with the EU is 60% higher than the value of its trade with China. It is also 20% higher than the value of trade between the EU and China.

The EU exported $606bn worth of goods to the US in 2024 - of which Ireland accounted for $103.3bn - while it imported $370bn. The US’s trade deficit with the bloc reached $236bn - up $27bn year-on-year.

Ireland is the top goods exporter to five US States - Indiana, Kentucky, Massachusetts, Tennessee, and Wisconsin. Germany is the top exporter to 38 US States.

In terms of services, US-EU services trade totaled an estimated $475bn last year consisting of the EU exporting $200bn worth of services to the US and importing $275bn. This resulted in the US having a services trade surplus with the EU of $75bn.

Ireland had the third-highest level of services imports from the US at $84.3bn but this was largely due to intellectual property charges which contributed $28.1bn.

Trade war

The report said that a trade war between the two regions would leave both “weaker, poorer, and less able to address other major challenges”.

It said such tensions would put a brake on European defence spending, hamper efforts to face down Russia over Ukraine and “destroy any chance that the two parties would align their approaches to the China challenger”.

Given the ratcheting up of trade tensions between the US and Europe, Malte Lohan, chief executive of the American Chamber of Commerce to the EU, stressed the need to safeguard transatlantic economic ties.

“The study’s findings demonstrate the importance of economic ties between Europe and the US – and the risk of letting the relationship deteriorate,” he said.

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“Leaders on both sides of the Atlantic now have a window of opportunity. Rather than engaging in a tit-for-tat that only hurts the two economies, they should come to the negotiating table to work out what a positive deal for the transatlantic economy looks like. The numbers show that it is in both sides’ interests.” 

Last month, Mr Trump imposed a 25% tariff on steel and aluminium imports into the US. European steel and aluminium producers account for about 20% of the US import of these products.

In retaliation, the EU announced it will impose trade “countermeasures” on up to €26bn worth of US goods, including bourbon whiskey, jeans and Harley-Davidson motorbikes, in retaliation to these tariffs. In response, Mr Trump threatened to slap a 200% tariff on alcohol imports from Europe.