Two of the world's most interconnected global economies are hurtling towards a collision with the US President preparing to unveil a raft of new tariffs on America's closest trading partners. No one on either side of the Atlantic knows what to expect.
The European Union is bracing for impact as US President Donald Trump prepares to unveil sweeping tariffs on all countries for what he has labelled the United States "liberation day" on April 2.
Trump wants to impose the wider US protectionist trade measures over what he said was years of European and other countries ripping off Americans and redressing supposedly unfair trade imbalances.
The US President is pushing behind the scenes for the most aggressive measures, which he sees as a historic opportunity to radically transform the US economy, according to White House sources.
To his closest aides, in fact, the president has admitted that he made a mistake during his first four years in the White House in allowing some of his advisers to dissuade him from higher tariffs, hinting that he does not want to fall into the same error.
While publicly flaunting confidence, the White House fears that the announcement expected on Wednesday will create a new jolt on the financial markets, already agitated by fears of possible stagflation caused in part by the duties themselves.
US Vice President JD Vance and White House Chief of Staff Susie Wiles, have in fact privately confessed that they do not know what exactly Trump will do, who has appeared to contradict himself several times in recent weeks.
Since taking office in January, the new US administration has threatened, and in some cases imposed, tariffs on goods from specific countries like Mexico, China and Canada and on targeted sectors, including aluminium, steel and cars.
Trump has also floated the idea of universal or reciprocal tariffs to be applied to most imports regardless of the country of origin.
The pending announcement has also sent investors and companies in Europe and across the world scrambling to position themselves against the mounting uncertainty with little detail offered by Washington.
Trump regularly rails against the European Union The US President's threat last week to impose 25 percent tariffs on car and parts imports added to the dour mood, and some warn the volatility will likely continue as governments react to the measures by either appeasing the Republican or retaliating in kind.
Trump has been especially critical of the European Union - because the US imports more cars from the EU than the other way around.
The 78-year-old has repeatedly expressed his anger in the past about the EU's tariffs on car imports from the US. While the US only levies a 2.5 percent tariff on cars from the EU, the EU charges 10 percent on US car imports.
However, the US tariffs on pickups and light commercial vehicles are significantly higher at 25 percent. Some companies therefore produce in the US or deliver the vehicles in individual parts and assemble them in the US.
Trump is also bothered by other EU regulations, such as strict emissions and safety standards, which could act as further barriers to trade. A member of Trump's staff said that the 25 percent tariffs would be added to existing tariffs on car imports.
Which European economies are at risk? With an early focus on the automotive sector and as a major exporting nation, Germany could be hit hard by the import duties. However, the exposure to Trump's tariff shock extends across Europe from Portugal and Denmark and all the way to Bulgaria.
The Confederation of Industry, the Automotive Industry Association and carmaker Škoda Auto have warned many Czech exporters are at risk of losing orders due to looming US tariffs. Indirect impacts on the Czech automotive industry can be substantial, even though only 0.8 percent of Czech automotive exports go to the US market, according to the Czech Chamber of Commerce.
Bulgarian Foreign Minister Georg Georgiev also warned the new wider US tariffs will affect the development of the supercomputer network in Europe and will have an impact on the Bulgarian science and research sector.
The head of Slovenia's Chamber of Commerce and Industry (GZS) Vesna Nahtigal underlined that the automotive industry is of key importance for Slovenia's economy. Cars and car parts exported to the US account for 6.3% of Slovenia's exports to the country.
The EU needs to think carefully before responding to additional US tariffs, Nahtigal warned. A response is necessary, but it could also be good to calm the situation, she said.
"I believe that tariffs and free market restrictions aren't good for anybody. Unfortunately, this is now reality, the zeitgeist," said Nahtigal. She believes that in the short-term the tariffs will worsen the conditions for European vehicles on the US market.
The increase in tariffs imposed by the US could have an impact of 1.1 percent of Portugal's gross domestic product (GDP), especially in the first two years of their implementation, according to projections by the Bank of Portugal (BdP).
For the Euro zone, this increase in tariffs could result in a cumulative contraction of the Euro area's GDP of between 0.5% and 0.7% after three years, with a more significant impact in the first year, BdP forecasts.
Although the prospect of a possible global trade conflict creates uncertainty about the future of the Danish economy, Danmarks Nationalbank believes in relatively high growth in the coming years.
Denmark is helped by the fact that the share of Danish exports sensitive to US tariffs has fallen and is at its lowest level in six years. This is according to an analysis by the Danish Labour Movement Business Council based on figures from Statistics Denmark.
Several Danish companies have moved parts of their production to the US. This avoids customs duties, which may be why the figure has fallen, according to Sofie Holme Andersen, Chief Economist at the Danish Labour Movement Business Council.
Europe readies response The EU has indicated they had plans to deal with Trump's announcement.
European Commission President Ursula von der Leyen said on Tuesday that the bloc still hopes for a "negotiated solution" to US tariffs but that "all instruments are on the table" to hit back if necessary.
"We are open to negotiations," the Commission chief told European lawmakers in Strasbourg, "but we have a strong plan to retaliate if necessary." Von der Leyen added that her team was consulting the EU member states.
The Commission leads the 27-country bloc's trade policy and has been in charge of discussions with the United States to avoid a trade war.
Spanish Prime Minister Pedro Sánchez has announced that his government is preparing a contingency plan to help Spanish sectors that could be most affected by a potential trade war with the United States.
Spanish Government spokesperson Pilar Alegría stated this Tuesday that Europe will give a "forceful" response to the US if the US administration imposes tariffs that harm Spanish productive sectors.
By contrast, Italian Prime Minister Giorgia Meloni cautioned the EU not to act impulsively. "It is necessary to act in a reasoned manner, trying to reach a point of balance," she said. Meloni enjoys closer relations with Washington than most European leaders and hopes to be a bridge to the Trump White House.
Italian Agriculture Minister Francesco Lollobrigida said Italy and Europe "cannot afford a trade war with the United States, it is our main market". He added: "We must reason with diplomacy, not with confrontation." The US is the third largest market for Italian fashion exports, with a trade interchange from January to October 2024 of 4.5 billion Euro for fashion and 3.1 billion Euro for related sectors, according to data provided by trade associations.
According to agriculture association Coldiretti, the blocking of wine shipments to the United States due to duty fears could cost Italian wineries 6 million Euro a day.
"Look, we have to be very strategic about our response here," said European Commission Spokesman for Trade, Olof Gill. "I repeat, we don't want to have to respond, but at the risk of sounding like my three-year-old son: they started it." "I can't tell you exact timings for when our potential response to these still not implemented actions will come, but I can assure you that it will be timely, that it will be robust, that it will be well-calibrated, and that it will achieve the intended impact," he added.
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