Europe after Trump’s Tariff Shock: a Fragile Resilience
The immediate damage may have been contained, but the long-term geopolitical costs are mounting. A commentary by Moreno Bertoldi, and Marco Buti
One year ago, with what he dubbed “Liberation Day”, Donald Trump delivered a severe blow to what remained of the rules-based international economic order, plunging the world into tariff chaos.
That disruption has not subsided. Even after the US Supreme Court ruled Trump’s universal tariffs unconstitutional, uncertainty persists and is likely to continue throughout much of this year.
For the European Union, Liberation Day—and the EU-US agreement that followed in Turnberry in July 2025—marked a turning point. The United States is no longer a partner and ally with whom cooperative solutions can be negotiated. It has become an economic rival, explicitly seeking to extract unilateral concessions from its counterparts.
Economically, the immediate impact of US tariffs on Europe appears relatively contained. In 2025, eurozone growth reached 1.4 per cent, broadly in line with the International Monetary Fund’s October 2024 forecast of 1.2 per cent. Despite a tripling of US tariffs on EU goods and an appreciation of the euro against the dollar, European exports to the US did not collapse; they even increased slightly, by 3.4 per cent.
Yet it would be premature to declare victory. Growth has been driven more by consumption and military spending than by investment. Export figures are also distorted by a surge in US imports early in 2025, as firms rushed to frontload purchases ahead of tariff hikes. Moreover, some sectors—notably steel, aluminium and related products, subject to tariffs as high as 50 per cent—have been severely affected.
While the direct economic cost of Trump’s tariffs has been limited, and largely borne by US consumers, the collateral damage should not be underestimated. On one side, the US-China trade conflict has redirected Chinese exports towards Europe, putting pressure on several segments of European manufacturing. On the other, asymmetric investment agreements imposed by Washington on both the EU and Asian allies are distorting capital flows in high-tech sectors, making it harder to achieve the investment surge envisaged in the Draghi report to revitalise Europe’s economy.
Politically, however, the consequences have been far more disruptive. The strategy of appeasement pursued by parts of Europe’s leadership resulted in a deeply asymmetric agreement at Turnberry—described by Sebastian Contin Trillo-Figueroa as a “great capitulation”. A few months later, the dispute with Beijing over rare earths and semiconductors ended in another unsatisfactory deal.
The outcome has been a loss of credibility for the EU on the international stage. A firmer and more decisive response immediately after Liberation Day—when financial markets were already penalising the US protectionist shift—might have produced more favourable results, not only for Europe but for all countries negotiating with Washington. That credibility could also have strengthened Europe’s position in dealings with China.
One year on, the EU must recognise that it is operating in a disorderly global economic environment in which the two superpowers increasingly rely on power politics. To counter this trend, Europe must continue to build a network of alliances—both to redirect trade and investment flows away from excessive dependence on the US and China, and to uphold a rules-based system against an increasingly conflict-driven logic in international relations.
This task has become even more urgent in light of the war launched by Trump in the Persian Gulf. Hopes that uncertainty might subside have faded, while the risk of a global recession is rising by the day. Back in June 2025, writing on VoxEU, we warned European policymakers not to negotiate with Trump on the assumption of favourable scenarios, nor to treat any agreement as final. Those principles, regrettably, are proving valid well beyond trade negotiations.
A previous version of this article was published by Il Sole 24 Ore
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
