Starting shots fired in US-EU trade war

First, they hit a relatively small share of trade (c5% of EU exports to the US, and c8% of imports from the US) and we expect the macro-economic impact to be small. And second, they are still nonetheless a much bigger deal than the steel and aluminium tariffs in Trump’s 2018 trade war. This is because they hit not only raw steel and aluminium, but also derivative products. In 2024, the EU exported €9.5bn in steel and aluminium to the US, but according to EU estimates, some €28bn in total exports will be hit by the new levies this time around. The EU response is therefore also much bigger, with almost full € for € retaliation in kind. Initially, the EU will per 1 April revoke the suspension of earlier tariffs on for instance bourbon and Harley-Davidsons, accounting for around €7.5bn in imports from the US, with an additional €18.5bn in imports to see tariff rises in April, subject to approval by EU member states. The latter could come into effect on 13 April.

What will the eurozone growth and inflation impact be?

While the steel and aluminium tariffs are much bigger than in the Trump 1.0 trade war, they are still relatively small, representing a 1.3pp rise in the trade weighted tariff rate on EU exports to the US. This is still well within the bounds of our base case for a 5pp rise in the trade weighted tariff, and is therefore fully consistent with our growth forecasts. We continue to expect trade front-loading in early 2025 to initially lift growth, with an increasing drag then materialising as the year progresses and moving into 2026. The tariffs are therefore fully consistent with our expectation for 1.2% growth in 2025, and 0.8% in 2026. Similarly for inflation, although retaliation is more than expected for this particular round of the trade war (we did not expect € for € retaliation in kind, but rather more limited and targeted), the inflation impact of this particular retaliation is close to negligible. The tariffs target 8% of EU imports from the US; the US share of total EU imports is 13%; around 20-30% of total goods consumption is imported; and goods makes up 26% of the HICP basket. Based on this, a 25% rise in tariffs on €26bn of imports adds 0.017pp to eurozone inflation directly (and this assumes full pass-through).

And for the Netherlands?

In 2024, the Netherlands exported approximately €1bn in aluminium and steel to the US, representing 2.5% of the Netherlands’ total exports to the US. This figure is slightly larger than the EU aggregate of 1.8%. Consequently, the impact of tariffs on steel and aluminium exports is somewhat bigger for the Netherlands. However, with the newly announced inclusion of derivative products in the tariff regime, our initial assessment suggests that the relative difference in the share of total exports from the Netherlands and the eurozone diminishes, aligning the overall effects more closely. Additionally, this round of tariffs appears to have a larger impact than the previous one due to the absence of exceptions for the steel sector, such as Tata Steel, which was previously exempt from the tariffs due to its production of steel products not manufactured in the US. Currently, no such exemptions seem to be in place.

As for the broader eurozone, although the tariff rise is substantially bigger than in the previous case, they are still relatively benign. The rise of the trade weighted tariff rate by roughly 1.3pp is still well within the bounds of our base case of a 5pp increase in the trade weighted average tariff rate. This means that the tariffs are consistent with our forecasts for a growth of 1.8% for this year and 1.0% for next year.

The other side of the coin: EU retaliation and implications for the Dutch economy

As explained above, the EU has announced to retaliate with targeted tariffs similar to the previous tariff period, set to take effect on April 1st. The commission is preparing additional measures scheduled for April 13th. Among the goods subject to retaliatory tariffs, certain sectors such as for instance cosmetics, glass products, and electrical appliances are relatively more reliant on imports from the US. Nonetheless, the retaliatory tariffs are designed to minimize harm to European economies.

Similar to the previous tariff period, we expect that Dutch companies will significantly reduce their imports of these goods from the US and that most of the additional tariff costs will fall on Dutch importers, as US exporters are unlikely to lower their prices. Still, the impact on inflation is expected to be negligible, like for the broader eurozone.

2 April is still the big announcement to watch

Although a headline-grabbing starting shot to a likely US-EU trade war, the key development to watch will come on 2 April, when the US will announce its so-called reciprocal tariffs. This could lead to much bigger and broader tariff rises that seek to compensate for VAT (which is not a trade barrier but has been identified as one by the Trump administration). We have laid out the potential impact of bigger and broader tariff rises here, and will likely review our base case following the April announcement.