U.S. and EU on the Brink of a Trade War: Trump Threatens 50% Tariffs

On May 23, 2025, former President Donald Trump announced plans to impose 50% tariffs on goods imported from the European Union, starting June 1. The announcement, made via a Truth Social post, accused the EU of unfair trade practices and sparked immediate market panic. While tensions are escalating, there’s still hope for resumed negotiations.

Escalating Rhetoric

Trump claimed that the U.S. trade deficit with the EU exceeds $250 billion annually, blaming the EU for erecting trade barriers, VAT schemes, corporate penalties, currency manipulation, and legal pressure on U.S. firms. He also proposed a 25% tariff on smartphones produced outside the U.S., targeting both Apple and Samsung. Apple CEO Tim Cook was reportedly encouraged to relocate iPhone production to the U.S., which would exempt the company from the new tariffs.

According to Gil Luria of D.A. Davidson, Apple is unlikely to meet the localization demands within 3–5 years. iPhone prices could rise by hundreds of dollars. Apple’s $500 billion investment plan for the U.S. does not include new smartphone manufacturing plants.

Market Reaction

Following Trump's post:

Apple shares fell 3%

The U.S. dollar weakened

Treasury yields dropped

Gold prices surged

Major indexes also declined:

S&P 500: −1%

DAX (Germany): −1.7%

CAC 40 (France): −1.6%

? Fox Business: Trump targets Apple, EU in new tariff threats

EU's Response

European Commissioner for Trade Maroš Šefčovič called the move "hostile and disruptive" and warned of retaliatory measures.
EU leaders from France, Germany, and Ireland issued statements urging renewed dialogue.

Key Sectors at Risk

The auto industry, especially in Germany, is most vulnerable. Trump specifically criticized the EU's limits on U.S. vehicle sales. Other at-risk sectors include:

Pharmaceuticals (France, Denmark)

Food and beverages (champagne, cheese, olive oil)

In 2024, the EU exported over $500 billion in goods to the U.S.:

Germany: €161B

Ireland: €72B

Italy: €65B

Global Impact

According to The Economist, 50% tariffs could disrupt global supply chains—particularly in high-tech, aviation, and defense sectors—and slash transatlantic trade flows by tens of billions.

A Fragile Path to Negotiation

To defuse tensions, the European Commission has offered to purchase up to €50 billion in U.S. goods. No official response has been issued by the Trump administration. A WTO complaint is also under consideration, though its effectiveness is doubtful given the U.S.'s history of ignoring WTO rulings.