Impact of New US Tariffs on the Supply Chain
The new US tariffs pose major challenges to the European economy.
Discover how companies can respond to trade conflicts, with strategies to avoid tariffs, adapt supply chains and minimize risks.
In early 2025, the US initiated a series of measures that included the introduction of significant customs duties on key sectors, namely steel, aluminum, automobiles and technology.
This decision prompted an immediate and intense international reaction, with major trading partners responding with tariffs, formal complaints to the World Trade Organization and intensified diplomatic negotiations.
As markets adjust and companies reassess their supply chain strategy, the long-term consequences of this assertive trade policy remain uncertain.
In the following article, we outline the new US tariffs, the European response and the tariff considerations, i.e. what business owners should consider from a tariff avoidance perspective when making business decisions.
Overview of U.S. Measures
A complete table of the most current and proposed measures, tariff rates, and goods/countries affected:
February 1, 2025:
In an effort to address concerns about illegal immigration and drug trafficking, President Trump announced tariffs on imports from Mexico (25%), Canada (25%), and China (10%).
February 3, 2025:
After lengthy negotiations, a consensus was reached on implementing a 30-day suspension of tariffs for Mexico and Canada, with both countries committing to strengthen their anti-drug measures.
February 4, 2025:
The implementation of the 10% tariffs on all Chinese imports is proceeding as planned.
February 10/11, 2025:
In a move that received a mixed response from global trading partners, President Trump announced plans to impose a 25% tariff on all steel and aluminum imports.
The move is intended to provide support to domestic industries in the United States and is expected to have the greatest impact on trading partners such as Argentina, Australia, Brazil, Canada, EU countries, Japan, Mexico, South Korea, and the United Kingdom.
February 18, 2025:
The United States government announced plans to impose a 25% tariff on automobile imports starting April 2, 2025. This measure is intended to provide support to the domestic automotive industry. In addition, the government is also considering implementing tariffs of 25% or higher on pharmaceuticals and semiconductors, aimed at reducing dependence on foreign suppliers. The imposition of tariffs by the United States has had a significant impact on the European automotive industry, given the United States’ status as a key export market. Automakers and suppliers are facing combined revenue losses of several billion euros. Therefore, the proposed tariffs have the potential to result in a substantial reduction in operating profits and weaken the competitiveness of European manufacturers, potentially leading to a decline in market share and job losses. The EU pharmaceutical industry is also likely to be affected, with US tariffs of 20% potentially reducing German pharmaceutical exports by a third. This could lead to a decline in sales and hamper investment in research and development, compromising the sector’s ability to innovate and be competitive in the long term.
27 February 2025:
Trump confirmed that from 4 March 2025, a 25% tariff will be imposed on imports from Canada and Mexico, as well as an additional 10% tariff on Chinese products.
1 March 2025:
In an effort to address ongoing challenges in the domestic timber industry, President Trump signed an executive order aimed at increasing US timber production. At the same time, he launched an investigation into the potential implementation of tariffs on imported timber.
4 March 2025:
The 30-day deferral period ends and the 25% tariffs imposed on trade with Canada and Mexico are implemented. Additionally, tariffs on Chinese imports are increased from 10% to 20%, precipitating the emergence of new trade conflicts.
March 12, 2025:
25% tariffs on steel and aluminum officially began to be implemented, which will impact EU exports as previous exemptions are revoked.
March 13, 2025:
In a recent development, US President Trump issued a warning to the European Union, threatening to impose 200% tariffs on wine, champagne and other alcoholic beverages if the EU does not withdraw its tariffs on whiskey. This move follows the EU’s response to US tariffs on steel and aluminum, where the EU announced its own tariffs on US products, amounting to €26 billion. In response to Trump’s request, France expressed its refusal and announced countermeasures. France and Italy, whose wine exports to the US amounted to around €4.9 billion in 2024, would be particularly affected.
March 26, 2025:
President Trump announced a 25% tariff on autos and auto parts for imports into the US. The tariff will go into effect on April 2, 2025 with tariffs for auto imports starting a few days later. For auto parts, tariffs are expected to start in May. This action will particularly affect Mexico, Japan, Canada and Germany as major foreign suppliers of autos and auto parts to the US.
Impact on the European Union
The US imposition of 25% tariffs on steel and aluminium has put a significant burden on European industry, as it has increased the cost of exporting to the US and weakened the competitiveness of European producers.
Companies may be forced to pass on the additional costs to their customers through price increases or reduce their profit margins, resulting in economic losses. This is particularly problematic for countries that export large quantities of steel and aluminium, such as Germany and France, whose steel and aluminium industries are highly dependent on international markets.
The tariffs could lead to lower production, job losses and the adoption of countermeasures by the EU, further exacerbating the transatlantic trade conflict.
The European Union’s response to US tariffs
The European Union has adopted a robust response to US tariffs of up to 25% on steel, aluminium and other products. The European Commission has stated its intention to implement a combination of existing and new countermeasures to safeguard European businesses and consumers from the economic ramifications.
Phase One: Reintroduction of Existing Tariffs
The European Union is countering the recently imposed tariffs by the United States on steel and aluminum imports by reintroducing its own countermeasures. These tariffs, originally introduced in 2018 and 2020 in response to U.S. trade restrictions but later suspended, will now be reintroduced, effective April 1, 2025.
The reintroduced tariffs will cover a broad range of U.S. products, including bourbon whiskey, motorcycles, jeans, orange juice, peanut butter and boats, with an estimated value of €2.8 billion. In addition, products such as steel products, industrial goods and specialty steel and aluminum products, with a value of approximately €3.6 billion, will be subject to the tariffs.
Phase Two: New Punitive Tariffs
New tariffs are being considered and the EU will introduce new tariffs on US products worth €18 billion, covering a wide range of industrial and agricultural products, including fruit, cereals and other agricultural products. The European Commission launched the consultation process with stakeholders on 12 March 2025.
As part of this process, a list of products that will be affected by the additional countermeasures has been published. This list has been made available on the website of the Directorate-General for Trade (DG Trade) and includes both industrial and agricultural products. The industrial products affected include steel and aluminium products, textiles, leather goods, household appliances, tools, plastics and wood products. In the agricultural sector, the products affected include poultry, beef, certain seafood, nuts, eggs, dairy products, sugar and vegetables.
The aim of these measures is to ensure that the economic damage caused by the US tariffs is offset to the same extent by the EU countermeasures. EU officials also said that the countermeasures are targeting products with high symbolic value, such as Bourbon and motorcycles. Further analysis also suggests that the EU tariffs are designed to target products from Republican-leaning states, such as soybeans from Louisiana and beef and poultry from Arkansas and Nebraska.
After the consultation phase ends on 26 March 2025, the EU Commission will undertake a full assessment of the feedback received, consolidate the findings and finalise the draft implementing act. The legal basis for this act is the implementing regulation (Regulation (EU) No 654/2014), as the US measures are classified as safeguard measures.
The implementation of the countermeasures, including the new tariffs, is scheduled for mid-April, at which point the implementing act will enter into force and the countermeasures will officially enter into force. The EU has stressed its openness to dialogue with the US. The aim of this dialogue is to reach a mutually beneficial negotiated solution that avoids an escalation of the trade conflict and is mutually beneficial.
Tariffs from the UK’s perspective
UK Prime Minister Sir Keir Starmer met with President Trump in Washington on 27 February 2025 to discuss a range of policy topics, including the possible introduction of tariffs on UK-produced raw materials.
Since President Trump took office, the UK has been hit by a series of tariff measures introduced by the US government to protect the US manufacturing sector.
The 25% tariffs on steel and aluminium products introduced on 12 March 2025 will increase costs for US companies, although the level of UK exports in these raw materials pales in comparison to the EU and other exporting nations. Comments from UK experts have suggested that the tariffs will impact existing military contracts and therefore increase US budget spending.
Unlike the EU, the UK has decided not to take retaliatory measures as it seeks to negotiate a free trade agreement with the US. This is partly due to President Trump’s positive announcement that a US-UK trade deal could be signed “fairly quickly”.
This could provide significant protection from further US-imposed blanket tariffs. To offset the benefits, the EU is very clear in its message that accepting some US products could impact any agreement on simplifying UK-EU border requirements.
As the EU is the UK’s largest trading partner (for exports), Prime Minister Starmer is likely to avoid upsetting the European Parliament at a time when discussions on the current EU-UK trade deal are due to begin in the coming months.
If the UK can avoid further damaging US tariffs, it could be in a great position to revive its manufacturing industry and increase its market share in the US.
Only time will tell, but UK manufacturers and exporters need to consider this carefully and plan for every eventuality to ensure that plans are in place to counter any emergency tariffs.
Reactions from other countries
The introduction of tariffs on steel and aluminium imports by the United States has prompted a strong reaction from various global players. Among the nations most negatively affected by this decision, Canada has been quick to declare its intention to impose retaliatory measures.
Prime Minister Justin Trudeau has said that the nation will apply a 25% tariff on more than $20 billion of goods from the United States, including steel, aluminium and other products. This move is intended to safeguard the national economy and express disapproval of US policy.
In response, China and Japan have expressed concerns about the potential consequences for global trade, urging the United States to reconsider its position to avoid escalating tensions.
Australia has also expressed its disapproval, although it has not yet taken any countermeasures.
Business leaders around the world are expressing concerns about the economic impact of these tariffs, with market uncertainty rising and companies facing higher costs and supply chain disruptions. Analysts have warned that a prolonged trade conflict could lead to a global recession. In short, most non-EU countries oppose the US tariffs and are considering retaliatory measures to protect their economies.
Customs Considerations for Businesses
Warehousing
For businesses importing large amounts of stock, using a bonded warehouse is a viable solution to ease cash flow and avoid unnecessary duties.
As the trade war continues to evolve, using a bonded warehouse could prove vital to managing exposure to any additional duties that may be imposed by the EU.
In fact, by storing goods in a bonded warehouse, the importer will be able to react quickly to any developments. Stock can be imported without paying any EU tariffs for an unlimited period of time. It also allows duties to only be paid upon removal from the warehouse, so costs can be managed more effectively, thus ensuring the business remains profitable during these uncertain times.
For importers with a slower turnaround of stock, a bonded warehouse could be beneficial as it could minimise exposure to any additional tariffs, as measures may have been removed by the time the goods are subject to a sale. This could manage any uncertainty and minimise the risk of unwanted tariffs on goods.
Any implementation of a bonded warehouse can be costly, both financially and in terms of resources, so may not be an option for many EU importers. The alternative is to use a third party bonded warehouse operator who can be employed to store goods on behalf of the importer. There will be additional costs, and this needs to be weighed against the potential benefits and financial planning required to ensure the imported goods remain viable.
Bonded warehousing should be a key consideration for importers exposed to EU countermeasures and should be explored as part of any planning to determine the benefits this procedure can present to the business in managing its customs obligations.
Country of Origin – Considerations for Reorganizing Supply Chains
Importers and exporters will be considering ways to mitigate costs and risks to their business. Whether it’s finding legal ways to import goods from the US without countermeasure duties or exporting to the US without US tariffs applying to those goods.
Such efforts could give rise to new sourcing/supply routes. Key to this is preventing such adjustments from being considered evasions of applicable tariffs. How could this be?
The relevant factor for applying punitive tariffs when importing or exporting to the US is not whether the goods are physically shipped from the US or the EU, but the origin of the goods. According to the regulations, such tariffs always apply to goods originating from the respective country, meaning punitive tariffs would apply even if US-origin goods were shipped from Canada to the EU. Therefore, avoiding tariffs simply by changing the shipping route or adding a commercial agent to the supply chain is not possible.
To avoid such tariffs, the origin must be changed to a country that is not subject to punitive tariffs. The origin of the goods is the country in which their last substantial processing took place. Therefore, for example, to avoid tariffs on US motorcycles, production must take place outside the United States, such as in Mexico.
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