Donald Trump has said he will impose tariffs on the European Union if the bloc does not make up its "tremendous" trade deficit with the United States.
"I told the European Union that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas," he wrote on Truth Social. "Otherwise, it is TARIFFS all the way!!!"
The European Union has not yet expressed a clear plan on how to avoid a trade war with the U.S. should Trump actually impose tariffs on goods and services coming from the bloc, as he threatened.
Why It Matters
Trump has repeatedly threatened to impose substantial tariffs on key trading partners in recent months.
He has said that Canada and Mexico will be hit with a 25 percent tariff on goods and services exported to the U.S. as soon as he takes office in January.
He also said in November that he would impose an additional 10 percent tariff on Chinese products entering the U.S. above any existing duties.
"I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States—But to no avail," he wrote on Truth Social.
"Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before. Until such time as they stop, we will be charging China an additional 10 percent Tariff, above any additional Tariffs, on all of their many products coming into the United States of America. Thank you for your attention to this matter."
Trump's threats have been met with concern by allied countries like Canada and Mexico, which have since taken action to clamp down on cross-border immigration and drug trafficking.
Earlier this week, Canada announced a set of new rules along the border with the U.S., including strengthening 24/7 surveillance in Ottawa and creating a joint "strike force" to go after organized crime.
Similarly, Mexico's new president, Claudia Sheinbaum, has promised to address the inflow of migrants and drugs into the U.S., though she did not agree to close the border, as Trump falsely claimed in late November.
Sheinbaum said she was confident she could reach a deal with Trump to avoid tariffs, but also threatened to impose duties on U.S. goods and services should Trump go ahead with his plan.
Economists have expressed concerns that tariffs might hurt the U.S. economy, hitting American consumers with higher retail prices.
What To Know
In 2022, U.S. goods exports to the EU totaled an estimated $350.8 billion, up 28.8 percent ($78.5 billion) from the year before, according to the U.S. government.
U.S. goods imports from the EU amounted to $553.3 billion in the same year, up 12.8 percent ($62.7 billion) from 2021. The U.S. goods trade deficit with the EU was $202.5 billion in 2022, a 7.3 percent decrease ($15.8 billion) from 2021.
Meanwhile, in terms of services—which include intellectual property and financial services—the U.S. exports to the EU totaled $241.2 billion in 2022, 19.0 percent ($39 billion) more than the year before.
U.S. imports of services from the EU totaled $170 billion in 2022, 29.4 percent ($38.6 billion) more than 2021. The country had a services trade surplus of an estimated $71.2 billion with the EU in the same year.
What People Are Saying
In remarks made to CNBC's Squawk Box Europe on Friday, Enrico Letta, former prime minister of Italy and dean of the IE School of Politics, Economics and Global Affairs, called for the European Union to retaliate to Trump's tariffs threat.
"I think it is a transactional approach, we have to respond to this transactional approach. [Trump] mixes together energy and tariffs on goods, manufacturing and so on. I think it's incorrect because the two topics are completely different," Letta said.
"If the deal is proposed by Trump—such an asymmetric deal on topics that are not linked one to the other—I think we have to do the same," he added. "Considering that the most asymmetric part is the relationship on the financial side, we have to start considering that maybe replying on the financial side could be a solution."
What's Next
It's not yet clear whether Trump will actually impose tariffs on the European Union, or any other country.
While the European Union will likely to try negotiate with the Trump administration to avoid tariffs, the bloc will also have to be prepared to implement retaliatory tariffs against the U.S. and enter a potential trade war with a key partner.
Christine Lagarde, the president of the European Central Bank, warned against the impact that imposing retaliatory tariffs would have on the European Union, floating the idea of increasing imports from the U.S. instead.
Newsweek