The second Trump administration has embarked on a novel and aggressive tariff policy, citing a range of economic and national security concerns. Our GeoEconomics Center’s new tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.
Explore the full tracker on our site.
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Three ways to think about Trump’s tariffs
The Trump administration utilizes tariffs in three primary ways, depending on the objectives of any particular action.
1. Negotiation tool: The administration sees tariffs as a way to put pressure on trade partners during negotiations, as well as a potential bargaining chip. Used in this way, tariff rates can increase US leverage and result in new trade agreements, like the US-China Phase One trade deal signed during President Donald Trump’s first term.
2. Punitive tool: Trump administration officials have stated that they would like to avoid overuse of financial sanctions as a form of coercive economic statecraft, since they believe it can incentivize countries to reduce their reliance on the US dollar. As an alternative, the Trump administration is relying more on tariffs to “punish” or “sanction,” including for non-trade issues. The administration values the ability to easily escalate the tariff rate and, therefore, its punitive power.
3. Macroeconomic tool: The Trump administration also, more conventionally, wields tariffs in support of a wide range of macroeconomic goals:
- Protecting domestic industries, such as steel, from unfair trading practices and encouraging domestic manufacturing.
- Decreasing US trade deficits.
- Increasing revenue from duties. Of course, the “Catch-22” is that if reshoring is successful, the United States will not be able to increase revenue from import duties.
Tariff calendar
This time around, Brussels was better prepared. Europe struck back immediately this morning, sticking with the “proportionate countermeasures” approach previewed by European Commission President Ursula von der Leyen a month ago. The Commission automatically reapplied suspended levies on more than four billion euros worth of US exports (steel and aluminum, bourbon, motorcycles, jeans, and orange juice) effective April 1, with plans for a second round worth over eighteen billion euros (on cosmetics, clothes, wood, soybeans, and other agricultural goods) set for April 13. Rather than punching back hard, Brussels seems to be prioritizing unity among EU member states and leaving the door open for a deal. The EU has also refrained from unleashing its new “anti-coercion instrument” and is keeping some of its powder dry. The staged approach is a signal with the Trump administration’s release of its “fair and reciprocal tariff plan” on April 2 in mind—that plan would hit a much broader cross-section of EU exports with duties. Go there and we will hit you harder, the Commission is saying.
In the lead up to this week’s tariff announcements, Brussels explored several avenues to get to a deal and avert Trump’s tariffs of 25 percent on both steel and aluminum imports, without getting any traction with the US counterparts. The back-and-forth trade threats and responses witnessed by Canada and Mexico should serve as lessons for Europe: It should firmly defend its industries, avoid signs of weakness, and leverage the continent’s economic weight and tools to respond to economic coercion. Neither Canada and Mexico’s proximity and trade integration with the United States, nor last-minute negotiation efforts by Japan, India, or Trump-friendly Australia, granted the countries exemptions.
But more fundamentally, Europe will have to confront the possibility that there may not be a deal to be had in the short term. Trump’s hyperactive tariff actions and talk of short-term economic pain for long-term gain may just betray a strategy to fundamentally shift the United States’ global economic engagement, turning its back on a seemingly broken multilateral trade system. Such a shift would pose a far greater challenge to an export-reliant and WTO-adherent EU economy than any broadside of US tariffs. Notwithstanding US market losses, early signs of economic slowdowns, and potential “transition” period ahead, Brussels must internalize the “America first” trade policy in Washington and develop a broader trade and industrial policy strategy quickly.
—Jörn Fleck is the senior director of the Atlantic Council’s Europe Center.
—Jacopo Pastorelli is a program assistant in the Atlantic Council’s Europe Center.
Tariffs based on these policy issues—rather than on trade measures—will widen the scope of the conflict, especially if the EU responds through its anti-coercion instrument, which allows for broader retaliatory measures, including tariffs on services and intellectual property restrictions. Should the United States and EU go down this path, the damage to their economies will be far greater than that caused by steel tariffs.
But for the EU, this is not just about economics. This is about institutional recognition and credibility. Trump has made clear his disdain for the European Union, and I have heard visiting members of the European Parliament come away from meetings with Republican legislators saying they now understood that the Republicans viewed Europe as an adversary, not an ally. No meeting is yet scheduled between Trump and von der Leyen. Thus, it may be that the EU’s retaliation is also aimed at forcing the Trump administration to deal directly with the EU. If that is the case, it will be even more difficult for the EU to back down.
Whether there can be a cease-fire depends on how much economic pain the EU and the United States can withstand. Europe’s economy has been sluggish overall, and the competitiveness debate has not yet translated into real reforms and growth in productivity. In the United States, inflation remains a key concern for voters—and is likely to be worsened by tariffs—while stock market declines threaten one of Trump’s key success metrics. Both sides will need to find an off-ramp before too long.
When that moment comes, both sides will need to save face with a deal. The EU has a “deal” ready, which Maroš Šefčovič, the EU trade commissioner, reportedly proposed and that features reductions in car tariffs and pledges to buy more liquefied natural gas and defense equipment from the United States. This may not be sufficient to quiet Trump’s concerns—it may be necessary to address the issue of digital service taxes and find a way to simplify some of the implementation of EU digital laws. Many in the EU would find that a challenging pill to swallow. But if it came with an acknowledgement of the EU and its role as an economic partner, there might be a basis for a settlement.
—Frances Burwell is a distinguished fellow at the Atlantic Council’s Europe Center and a senior director at McLarty Associates.
The US auto sector faces tariff whiplash. While the automotive sector’s tariff rates for critical manufacturing inputs seem to be changing on a daily basis, the sector’s economic fundamentals are more rigid. Trade with Canada makes the US automotive sector more competitive. Canada accounts for about 78 percent of steel and iron and 95 percent of aluminum imports for the Detroit census district, the beating heart of the US auto industry. Steel and aluminum are critical cost drivers for autos; lightweight aluminum is used extensively in electric vehicles. With few near-term alternatives to Canadian steel and aluminum providers, US automakers will be forced to accept higher costs from domestic producers of these materials. Accordingly, US automakers will be forced to pass on higher input costs to consumers, cut production, and eliminate jobs. Investment plans will be stalled due to uncertainty. Crucially, the US auto sector will become less competitive relative to international competitors—especially Chinese companies.
Chinese automakers will be the primary beneficiaries of the tariffs. Not only will US automakers’ competitiveness suffer from higher input costs, but other trading partners—Europe, Mexico, and especially Canada—might begin to consider Chinese-made electric vehicles and connected vehicles as more appealing on commercial and diplomatic grounds.
—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative; he also edits the independent China-Russia Report.