The U.S.-EU trade conflict is endangering a $9.5 trillion economic relationship, warns the American Chamber of Commerce to the EU (AmCham EU). Despite record-breaking trade in goods and services, surpassing $2 trillion in 2024, rising tariffs risk derailing this vital partnership.
Recently, Washington imposed tariffs on steel and aluminum, prompting EU retaliation. U.S. President Donald Trump has also threatened 200% tariffs on EU wine and spirits, citing trade imbalances. While the U.S. runs a trade deficit in goods with the EU, it enjoys a surplus in services.
AmCham EU highlights that trade is only one facet of transatlantic commerce; investment is the real benchmark. Contrary to conventional wisdom, most U.S. and European investments are directed toward each other rather than emerging markets. U.S. foreign affiliate sales in Europe quadruple U.S. exports, while European affiliate sales in the U.S. triple European exports.
Lead author Daniel Hamilton warns that the dispute could disrupt deeply integrated supply chains, with intra-firm trade accounting for 90% of Ireland’s and 60% of Germany’s trade. Further consequences could extend to services, data flows, and energy markets, with Europe heavily reliant on U.S. LNG imports.
Interwoven value chains are crucial for global competitiveness, as seen in BMW’s U.S. manufacturing for export. Hamilton cautions that isolating investments could cripple efficiency and increase costs. The economic fallout could have widespread consequences, jeopardizing a historically robust transatlantic partnership.