Investigation Team
For decades, the economic relationship between the United States and the European Union has been painted as a partnership grounded in shared democratic values and mutual prosperity. Yet beneath the surface, a long-simmering battle over trade has unfolded—one marked by retaliatory tariffs, WTO disputes, and the ever-present threat of escalation. From aircraft subsidies to agricultural products and digital services, tariffs have become both a weapon and a shield in a geopolitical tug-of-war.
As economic nationalism rises and global supply chains grow more fragile, tariffs have returned to the center stage of global economic policy. But who really pays the price when tariffs are imposed? And how are the politics of protectionism shaping the future of transatlantic trade?
What Are Tariffs and Why Do They Matter?
Tariffs are taxes imposed on imported goods, usually as a means of protecting domestic industries or as leverage in trade negotiations. When a country places a tariff on foreign goods, it typically raises the price of those goods for consumers and businesses, aiming to encourage people to buy local instead.
But tariffs are more than just numbers on a spreadsheet. They affect everything from the cost of groceries and vehicles to diplomatic relations and job markets. In theory, they protect domestic producers. In reality, they often trigger trade wars.
The United States and the EU, two of the world’s largest economies, have used tariffs to express economic discontent, enforce trade rules, or retaliate against each other for perceived injustices. The impacts, however, go far beyond their borders.
Flashpoints in Transatlantic Trade
The U.S.–EU tariff saga has had no shortage of conflict points:
1. The Boeing-Airbus Dispute
For over 17 years, the U.S. and EU clashed at the World Trade Organization (WTO) over subsidies given to aircraft manufacturers Boeing (U.S.) and Airbus (EU). Both sides accused the other of unfair government support. In 2019, the WTO ruled in favor of the U.S., allowing it to impose tariffs on $7.5 billion worth of EU goods—ranging from French wine to Italian cheese and Scotch whisky.
In 2021, the EU responded with its own tariffs on American exports, including tobacco, nuts, and tractors, totaling $4 billion. The transatlantic feud hit consumers and small businesses hard, particularly in the food and beverage industries.
2. Steel and Aluminum Tariffs (Section 232)
In 2018, under the Trump administration, the U.S. invoked national security to justify a 25% tariff on steel and 10% on aluminum imports—affecting key European exporters. The EU swiftly retaliated with duties on American products like bourbon, jeans, and motorcycles.
Although a temporary truce was reached in 2021 under President Biden—shifting the tariffs to a quota system—the threat of reimposing them looms large amid rising global tensions and ongoing talks about carbon border adjustments.
3. Digital Services Taxes
In recent years, EU countries such as France and Italy have proposed or implemented digital services taxes targeting U.S. tech giants like Google, Amazon, and Facebook. Washington viewed these as discriminatory and responded with threats of retaliatory tariffs, creating yet another layer of tension in an already strained economic relationship.
Who Pays the Price?
While tariffs are imposed by governments, the costs are often borne by consumers, small businesses, and workers.
Impact on Consumers
When the U.S. imposed tariffs on European cheese and wine, the prices of those items surged in American stores. Importers, distributors, and restaurants had to pass on the higher costs to consumers or cut margins. Similarly, European producers of motorcycles or jeans suffered a drop in U.S. sales due to EU retaliatory tariffs.
Impact on Small Businesses
In both the EU and the U.S., small and medium-sized enterprises (SMEs) are disproportionately affected. Unlike large corporations, SMEs often lack the resources to absorb increased costs or shift supply chains. For a specialty cheese shop in New York or a tractor parts supplier in Bavaria, tariffs can mean lost contracts, layoffs, or closure.
Impact on Global Trade Order
Perhaps more subtly but no less importantly, the tit-for-tat use of tariffs undermines the multilateral trading system built around the WTO. Experts warn that persistent tariff conflicts between the EU and U.S. could embolden other countries to bypass rules-based trade altogether.
“What’s at stake isn’t just wine or steel—it’s the future of global economic cooperation,” said Dr. Martina Keller, a trade policy expert at the European Trade Institute.
Tariffs in the Era of Climate and Technology
In recent years, the nature of tariffs has begun to shift. No longer just tools for protecting local industry, they’re now being reimagined as tools to fight climate change or regulate tech giants.
Carbon Border Adjustment Mechanism (CBAM)
The EU’s upcoming CBAM is a prime example. Starting in 2026, importers will have to pay for the carbon emissions associated with products like steel, aluminum, and fertilizer. While the policy is framed as an environmental measure, U.S. officials worry it could function as a de facto tariff on American goods.
“We support decarbonization,” said Katherine Tai, the U.S. Trade Representative, “but climate policy must not become an excuse for protectionism.”
Trade and Tech Regulation
As digital platforms become increasingly central to the economy, disputes over data privacy, artificial intelligence, and taxation have escalated. The U.S. has warned against EU attempts to regulate or tax American tech companies, arguing that such moves unfairly target U.S. firms and distort trade.
A Way Forward?
Despite the conflicts, there are signs of a more cooperative approach emerging. In 2021, the U.S. and EU launched the Trade and Technology Council (TTC) to address shared challenges—from digital policy to supply chain resilience.
The suspension of tariffs in the Boeing-Airbus dispute and a joint commitment to tackle global steel overcapacity marked a turning point, though fragile.
“We’re not out of the woods,” said Jean-Claude Barrot, a senior EU trade negotiator. “But dialogue is back on the table, and that’s a good sign.”
Trade experts suggest moving beyond tit-for-tat retaliation and toward collaborative trade rules that address today’s biggest threats—climate change, digital monopolies, and economic inequality.
Tariffs as a Mirror of the Times
The story of EU–US tariffs is not just about taxes on goods—it’s about competing economic visions in an era of shifting global power. Tariffs are the symptoms of deeper struggles: over sovereignty, corporate accountability, environmental responsibility, and geopolitical influence.
In a time where global cooperation is increasingly fragile, the transatlantic relationship remains one of the pillars of the international order. But if tariffs continue to be used as blunt instruments rather than tools of structured diplomacy, the long-term cost may be greater than any short-term economic gain.
The challenge, then, is not simply to lift tariffs, but to redefine trade for the 21st century.
What has Trump proposed?
The tariffs add a 10% tariff on nearly all imported goods from all trading partners. Additionally, reciprocal tariffs would be imposed on imports from dozens of countries.
For imports from the European Union, a new 20% tariff will be set. For individual countries on the list, the rate varies: China 34%, Japan 24%, Vietnam 46%, South Korea 26%, Taiwan 32%.
Goods from Switzerland will be hit with an additional 32% tariff, Israel with 17% and India with 27%.
Looking ahead into the unknown
Right now, it is impossible to estimate all the effects these tariffs will have on the US and its trading partners. But most observers say that economic growth will slow and there will be no real winners. Some unintended consequences of these economic policies may take years to quantify.
Taking the US out of normal trade balances — or making it a less attractive partner — could lead to new political and economic alliances.
Canada has already been looking to the European Union as a more reliable partner. The EU or Mexico could tilt toward China. For their part Japan, South Korea and China recently announced that they will work together to have a more unified voice when it comes to the economy.
More immediately, American consumers will suffer as companies raise prices for imported goods. Poorer Americans who spend a bigger part of their income on basic goods will be hit hardest by price increases. Higher prices could push up inflation.
Countries hit by new US tariffs are likely to retaliate with their own duties on American goods, which could lead to even more US tariffs. Depending on how much pain these countries are willing to go through, this retaliation could quickly escalate into a wider trade war.