ieExplains: What happened the last time Donald Trump put tariffs on Europe?

While Mr Trump implemented tariffs on steel and aluminium imports in his last term in office, the scale this time is just so much bigger and the potentially downside risks are so much higher

US president Donald Trump announcing tariffs last week. 

Markets are reeling, global economic risks are increasing, growth forecasts are shrinking and US president Donald Trump is not for turning, apparently, on the trade war he launched last week against pretty much every country in the world.

While it might be bad now, unfortunately, things can only get worse as countries look to retaliate against the US and impose their own tariffs on US imports. The EU is expected to outline its own retaliatory tariffs soon.

Last time he was in office, it took Mr Trump about a year to start implementing tariffs, but this time he is speedrunning a massive change in US trade policy. While Mr Trump has put the world in a similar position before, the scale this time is just so much bigger and the potentially downside risks are so much higher.

What happened last time Donald Trump implemented tariffs?

During Mr Trump’s first term, he imposed a 25% tariff on steel imports into the US and a 10% tariff on aluminium imports. He enacted a similar policy at the start of his second term, but this time increasing the aluminum tariffs to 25%.

The stated goal of this tariff in particular is to protect US steel and aluminum makers and create jobs.

While domestic production of these materials rose during Mr Trump’s first term, prices for these materials also rose. In the months following the tariff announcement, as global steel aluminium prices declined, prices for these materials fell more slowly in the US. By mid-2019, tariffs were lifted for Canadian and Mexican imports — which accounted for 27% of the US’s steel imports and 43% of its aluminum imports.

President Joe Biden rescinded the tariff for the EU in 2021 following a deal with the EU.

According to an Oireachtas Parliamentary Budget Office report on trade between Ireland and the US, during the three and a half years the tariffs were in place, the average monthly value of steel exports to the US was 19% lower compared to the average values exported from January 2015 to June 2018.

These years did overlap with the start of the covid pandemic, so the reduction may not have been solely due to the tariffs.

Following the removal of tariffs in January 2022, steel exports increased, with average monthly exports from January 2022 to December 2024 being 59% higher than during the tariff period.

In contrast, total EU exports to the US, most of which were not subject to additional tariffs, increased by 8.2% during the tariff period and by 28% from January 2022 to December 2024.

The impact of aluminium exports, which faced a 10% tariff, was less dramatic than that on steel.

Aluminium exports initially increased after the tariffs were imposed, peaking in April 2019. Overall, aluminium exports increased by 25% during the tariff period and by an additional 12% after the tariffs were lifted.

Ireland was less affected by these tariffs, as it exports relatively small amounts of these products to the US. During the tariff period, Ireland’s steel exports were 1% lower than from January 2015 to June 2018, while aluminium exports decreased by 3%.

How did the EU retaliate?

In June 2018, in response to the US’s tariffs, the EU targeted specific US exports including food, beverages, tobacco, steel, aluminium, motorcycles, sea vessels, and playing cards.

During the period these tariffs were in place, averagely monthly imports of these products fell 38%. They increased by 23% after these tariffs were removed.

For Ireland, the average monthly imports of these tariffed products fell by 62% after the tariffs were implemented, and imports more than doubled after the tariffs were removed.

Total imports from the US, the majority of which were not subject to the tariff, fell by only 1% over the period the counter-tariff measures were in place.

What does this show?

The US tariffs on steel and aluminium kicked off a smaller scale trade war, which nonetheless hurt businesses on both sides of the Atlantic, reduced trade volumes in specific sectors, as well as increased prices.

How are things different this time?

Tariffs are an economic tool and are often designed to protect certain industries from unfair competition from abroad. A prime example of this is the automotive industry and the shift towards electric vehicles.

Last year, the EU Commission slapped Chinese-made electric cars with substantial tariffs over concerns Chinese manufacturers were benefiting from unfair state subsidisation which was causing a threat of economic injury to EU manufacturers.

Flooding the market with cheaper electric cars and gaining market share would be to the detriment of manufacturers in Europe, which could lead to factory closures and job losses. So the EU sought to use tariffs to level the playing field slightly by making Chinese electric cars more expensive.

This is how tariffs are often designed to work, protecting industries or sectors that are important to a country or region.

However, how Mr Trump has gone about implementing these latest tariffs is radically different. Rather than implementing tariffs to precisely target and protect certain industries, Mr Trump is using them as a blunt weapon in an attempt to address trade imbalances.

Tariffs on all goods entering into the country does not strategically protect any one industry but simply just raises prices on everything imported.

Why does the EU have to respond to the US tariffs?

There are a couple of reasons why the EU, and other countries, will implement retaliatory tariffs against the US.

One of the reasons is that the EU will want to make the US feel more economic pain for starting this trade war in order to emphasise how damaging they can be. It will also give it leverage in any trade negotiations should both sides agree to remove tariffs on each other.

The downside, as there is no upside to a trade war, is that prices will rise in Europe as well.

In addition, European companies will be at a disadvantage as they face more difficulties doing business in the US or US companies. The EU will want to make it more difficult for US companies to do business in Europe as a result.