Yves here. Readers who are long in tooth may recall an analogue to European customers reject US wares, even at better prices, from Japan in the 1980s. Then the US sought to tame a yawning trade deficit with Japan via the Plaza Accords, by which the then G-5 worked together to manipulate the Japanese yen much higher. The theory was that a newly expensive yen would dent US purchases of Japanese output, particularly cars, and also aid US manufactures in gaining market share in the hard-to-crack Japanese market, via better prices.
While US imports of Japanese products did fall, Japanese imports barely budget. Japanese had and may still have a very firm belief that Japanese wares are superior to foreign analogues. If you’ve ever seen the perfect fruits in holiday wooden gift boxes sold in Japan, you might understand where this belief comes from. When I often visited Japan, in the mid-later 1980s, I could see the fastidiousness of some Japanese customers. For instance, I would see them occasionally turning a shirt inside out to count the number of stitches in seams.
One can readily see how America’s industrial framing practices would prejudice European buyers against US food, and that (justified) dim view would bleed into how they assess other US offerings.
The post also describes how the EU could retaliate for expected US tariffs. Here, the bloc seems to be in a much stronger position than with NATO and Ukraine.
By Waya Quiviger, Professor of Practice of Global Governance and Development, IE University. Originally published at The Conversation
The US-EU trade war is gathering pace. Following the imposition of 25% US import tariffs on steel and aluminium from March 12, President Trump has announced further plans to introduce “reciprocal” tariffs on all countries on or after April 1. This means that the US would match other countries’ import duties in a tit-for-tat manner, or as Trump put it, “they charge us, we charge them”.
Such measures would have a devastating impact on the EU’s auto industry, as Trump also aims for the new tariffs to mirror the EU’s Value Added Tax (VAT) and subsidies, potentially leading to a de facto 30% tariff on European cars entering the US.
Trump has repeatedly voiced his grievances against the EU, stating “they don’t take our cars, they don’t take our farm products, they take almost nothing, and we take everything from them. Millions of cars, tremendous amounts of food and farm products… the European Union, it’s an atrocity what they’ve done”.
But how justified are Trump’s grievances? Is the US really being treated unfairly? And why is there a trade deficit between the two powers in the first place?
Trump Overlooks Service Exports
Over the past 15 years, the EU has consistently exported more goods to the US than it has imported. According to Eurostat data, the US goods trade deficit with the EU stood at $158 billion in 2023. Between 2013 and 2023, the EU’s surplus in trade in goods with the US varied from €81 billion in 2013 to €166 billion in 2021.
However, in services, the US had a surplus of exports over imports with the EU amounting to €104 billion in 2023. This significantly reduces the overall trade deficit to “only” €54 billion, a relatively small amount compared to the US economy’s total value of $27 trillion.
Despite this, Trump focuses exclusively on the deficit in traded goods and threatens to match tariffs raised by other countries to achieve a level playing field. However, overall tariff rates between the two blocs are fairly similar, with an average of 3.95% for US products and 3.5% for EU products. Nevertheless, there are significant variations in certain sectors.
Trump’s concerns about tariffs on cars, agriculture and food are not completely unfounded. For example, the EU tariff rate on imported cars is 10%, compared to 2.5% in the US, and EU tariffs are around 3.5 percentage points higher on food and beverages. Additionally, tariffs on chemicals are on average 1 percentage point higher in the EU than in the US.
In these areas, the EU could indeed encounter significant tariff threats and difficult negotiation sessions ahead.
EU Regulations Could Rein in US Tech
The EU has promised a “firm and proportionate” response, stating that it is prepared to retaliate against the 25% tariffs on steel and aluminium and any further tariffs. EU member states have already authorised tariffs of up to 50% on €4.8 billion worth of US imports, and could swiftly finalise a vote to enforce them.
The targeted products include bourbon whisky, Harley-Davidson motorcycles, motorboats, and certain steel and aluminium items. These tariffs are set to automatically take effect at the end of March, unless a majority of EU countries decide to implement them earlier.
Another potential leverage point is the EU’s regulatory power, particularly over Big Tech. This is a significant concern for Washington, with companies like X and Meta under EU scrutiny over content regulation and data sharing with authorities.
As the world’s largest exporter of services, the US could face considerable EU retaliation. Brussels might impose additional restrictions on American consulting and financial firms, increase digital taxes on US platforms or revoke intellectual property rights.
Despite having the upper hand in this arena, the EU has insisted that it prefers negotiation over confrontation. In a recent meeting with US Vice President JD Vance, EU President Ursula von der Leyen reaffirmed the EU’s “commitment to a fair trade relationship [with the US].” She suggested that the EU could buy more US products, such as liquefied natural gas, to narrow the trade deficit.
Bernd Lange, chair of the European Parliament’s trade committee, recently told the press that the bloc was open to reducing its 10% import tax on cars to align more closely with the 2.5% rate imposed by the US. Another potential offering could be to increase defence spending and buy US arms and weaponry.
However, beyond tariff differences, there are other major factors that explain the longstanding trade deficit between the US and the EU, and these are not as easy to fix.
The EU Doesn’t Trust US Goods – Especially Food
Consumer behaviour and preferences – on both sides of the Atlantic – play a huge part in the US-EU trade relationship. A trade deficit often reflects differences in production costs and product quality. This suggests that American consumers generally prefer European products over domestic alternatives, while European consumers favour their own products over American ones. The result is a trade deficit in favour of the EU.
One major contributing factor, particularly in food exports to the EU, is the bloc’s stringent regulations on agriculture, which the US has repeatedly challenged. These include rules on hygiene and pesticides (known as sanitary and phytosanitary standards, SPS) and geographical indications (GIs). Longstanding and unresolved trade disputes involving agricultural products have limited US exports to the EU, particularly in beef, poultry, and dairy products.
The EU’s SPS rules can also hinder trade in food products that utilise biotechnology and other production methods commonly used in the US. A notable example is the EU-US beef hormone dispute, which lasted from 1996 to 2009.
For 13 years, the EU imposed a total ban on US beef imports citing health concerns related to hormones, under the EU’s precautionary principle (“better safe than sorry”). The US repeatedly challenged this ban, and even took it to the World Trade Organization. In 2009, the EU agreed to import a quota of hormone-free US beef.
The dispute resurfaced when the US alleged the EU was not honouring this quota, eventually leading to a deal in 2019 where the EU agreed to import 35,000 tons of hormone-free US beef.
The EU’s geographical indication (GI) regulations also restrict trade in certain foods, wines, and spirits labelled with EU-protected names that US producers consider generic. For instance, US cheeses labeled as parmesan or asiago cannot be sold in the EU, as only cheeses produced in regions with GI registrations can use those names.
While the US contends that these regulations are a form of protectionism, the EU maintains that its health and sanitary standards are stricter than those in the US and apply uniformly to all non-EU products, not just those from the US.
Trade War Seems Inevitable
Regardless of whether the US’s grievances are justified or unfounded, the reality is that the EU and the US are on a trade warpath with no end in sight. The EU asserts that it is better prepared for Trump 2.0, boasting an expanded retaliatory toolkit that includes the Anti-Coercion Instrument and an updated EU Enforcement Regulation for trade disputes. Whether these measures will be sufficient to deter the US remains uncertain.
What is clear, however, is that we are witnessing a remarkable reversal of history. The US, which has championed free trade for the past 80 years, is now actively challenging the rules and principles that underpin the multilateral trading system, with potentially catastrophic consequences for the EU, the US, and the rest of the world.
GI geographical indication is vague naming. It is in fact about local traditions. For instance Salers is a variant of Cantal cheese that is produced in Salers district with Salers cows fed on local pasture, and the milk unpasteurized. You can’t make Salers anywhere else that in that specific district with these cows and the surrounding eco-system. Other agricultural productions are not ties so much to local specific but for sure to local centuries old traditions French has a dedicated name for this “terroir” (from “terre” = ground, soil).
But even when not the case, some food are what they are because the savoir-faire tradition.
American food products are notorious as highly industrialized and pumped up with many additives. Or are not what the name say they should be, for instance cheese not being cheese, etc.
American cars don’t sell because they are huge, oversized, fuel hungry and automatic gearbox
“the EU has insisted that it prefers negotiation over confrontation. “
Russians ROTFL
Second that, I lived in the US for a few years, I’d never put US Agroindustrial food into my mouth – it’s poison, I even avoid EU mass-produced food if I can grow it myself. And yes, one of these obscenely oversized gas guzzlers is a no go. People here are very “particular” about food and eating. I bought an All American Canner because it is really good quality though, that’s what counts. Tarifs won’t change any of those habits.
It is several years since I was in the US but apart from certain big cities, SF, NY and New Orleans, the food is desperately bland, and the coffee too weak to even look at. When you factor in ‘chlorine-bleached’, growth hormones, GMO foodstuffs etc., EU consumers are rightly cautious about buying American products. One time I saw cut and packaged scallops in a supermarket in south England with origin given as Newfoundland that was labelled ‘air-freighted for freshness’, yet the store was close to the English channel where local scallops are fished much of the year. Even air-freighted across the Atlantic cannot compete with road transported 20 miles.
As Antonio notes, American cars and motorcycles are too big and thirsty other than for ‘Raggare’ as they are called in Scandinavia who love to cruise round town in older US cars on the weekend. Sure there are US clothes brands that, I suspect, like most European brands, are actually made in the far east, as most technology is.
I do like many American music bands and writers, but does Trump think we don’t buy/download enough CDs and books? And Hollywood films are mostly dross as are TV programmes. Hard to see how Europeans are going to be persuaded to buy more American.
Bleached chicken, one reason why so many Europeans refuse to eat American foods. Add in the visible blood, is that a tumor, in packages and that is off-putting. Add in the hormones and factory farmed aspect, and, yuck.
Eggs are tastier in Europe, fresher and hatched in better conditions for the hens.
Pasta from Italy does not have the gluten issues of American pasta because the former does not have the sketchy wheat and pesticides.
Coffee tastes better, not just due to the charming surroundings. :)
Can you tell that I am hungry? ;)
Good, fast, cheap – pick two. Sometimes you may not even get that choice based on the offerings.
Eggs are even cheaper in Italy now….
The response of suppliers here in poor(ish) part of UK is interesting. Indeed, there is absolutely no increase in availability of US foodstuffs. Indeed old EU precautionary principles on ingredients are not “disappearing overnight”. Aussie foods like TimTams are still only sold in “specialty shops for Australiana”; the only pre-EEC products I’ve seen appear in large quantities are Irish (Tayto crisps – absolutely chock full of fat but in great demand).
Maybe UK experiences with food scandals involving eggs and beef still remain fresh in people’s minds and we’ve heard a LOT about US production. But Brits are less picky when it comes to clothes: fast fashion still reigns supreme and though much of this starts in Asia, I sense any US involvement will continue to be ignored by Brits until prices really begin to bite since that seems to be the key factor that is increasingly biting.
Price might be why 99% of ads on Twitter are for Temu but there are more and more videos about them so I suspect this won’t continue.
Time was when anything coming out of China was considered potentially dodgy and in the past you have had things like the 2008 Chinese milk scandal-
https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal
More recently you had the same with baby formula causing Chinese to purchase baby formula from other countries to the point that ‘It had been estimated in 2018 that up to 80% to 90% of infant formula purchased in Australia was destined for China’.
But now I am seeing more and more stories in American newspapers about recalls due to contamination of food or listeria or whatever. It is a constant background noise. So if American corporations cannot be bothered producing food that is safe and sanitary to eat in the US, why should the EU buy and import it? Sorry guys, but it is not a confidence booster when you see that the FDA’s deputy commissioner for human foods just quit-
https://www.axios.com/2025/02/20/fda-food-division-cuts
I am German but spent part of my youth in North America. My family was big into the outdoors and – as we were switching continents – we had the choice between US made equipment and European made equipment. Well into the 80’s US made stuff was the very best. Sleeping bags, tents you name it. All Made in the US. I have a North Tent tent that was made in the 80s in the US and I still use it every summer. Unbelievable quality! Until Covid I used to run an outdoors business and naturally kept abreast of tents, sleeping bags et al. Nothing made in the US anymore. Just goods from Asia with North Face et al slapped on. The quality is middling.
So what happened? My cousin who heads a specialised autoparts manufacturer here in Germany (only competitor remaining is a japanese company) told me that it was two things that killed the Midwestern competition: PE and the Pentagon. PE is straight forward. In manufacturing every new round of capital outlay is increasing productivity by leaps and bounds. If you don´t invest you will fall behind and won´t be able to compete after a few years. We are talking here about tremendous amounts of money. Typically capital cost is several times higher than wages. But you can also simply stop investing and pocket the money. After a few years the company is not viable anymore, you sell the tool machines for scrap, the patents to Germany or Japan and then head back to Wall Street.
His other theory is not as straight forward. He thinks the unbelievable amounts of money shoved to Defense by Reagan crowded out private borrowing resulting in sky high interest rates which also was a factor in killing US industry. Finally it is simply the Dollar that is killing US manufacturing. The US is the only country in the world that doesn´t need to export anything as it can just print greenbacks. Every other country in the world would have long ago felt the pain of a depreciating currency were it to engage in such suicidal policies. Seems like the reckoning has finally arrived for the US as well. Trump and Musk seem to think they can have their cake and eat it. I.e. have the Dollar as the world’s reserve currency and restrict trade. It’s either or and now chaos looms. Especially when on top people like Musk start to dismantle bureaucracies like Social Security. On the long term though it is probably good for the US if financialisation finally ends. Would be nice if once more there would be great tents “Made in the US”.
People mention countries that manifest a natural “resource curse” such as oil, cobalt, lithium that fails to benefit the general population when sold on the global market.
These countries seem to end up with an entitled, corrupt elite class.
Perhaps the reserve currency status of the USD has been a similar “resource curse” for the general populace of the USA?
And it is funding much of the world damaging US elite behavior.
That would make the situation of the USA very similar to the one of Spain from the mid-17th to the very early 19th century.
The origin of lightweight high quality wilderness sports equipment in the US comes from the purpose it had to serve; it had to be light enough to carry on your back, and not to fail in a location where there was no substitute — you couldn’t go back to a hut. The buyers were people who emphatically did not want to rely on pack animals or vehicles to carry their equipment. This was necessarily a small group of people in the immediate postwar United States — so the producers were small, and the buyers were highly discerning. And it was a small enough group where everyone knew everyone else, customers and producers. Usually they were located in the Pacific coast states, Colorado, or the New England states.
While these businesses grew fast during the baby-boom vogue for backpacking in the 1970s, rising costs and the aging of the boomers stressed production and demand, and the original owners of the producers and retailers began to sell out. REI, for example, nearly went out of business. The Holubars, in Colorado, sold their business. Patagonia nearly went under. The North Face and Sierra Designs changed hands. By the 80s, the famous Berkeley shop and producer, The Ski Hut, (immortalized as The Ski Shop in Kerouac’s The Dharma Bums ) finally closed up shop. There were scandals over adulteration of down products and poor sewing quality. Large non-wilderness sports conglomerate buyers bought formerly respected brands and cheapened the products. Factory production was offshored; The North Face locked out it’s dedicated US sewing staff.
Wilderness sports had become mass sports big enough to make big money on, but the magic circle of the community was dispersed. High quality producers, where they exist, are few and small.
I still have the North Face sleeping bag that I bought in 1971. I wouldn’t use it in the winter now (which I could have when it was new), but it still works fine for summer camping. It cost $100 then, a lot at the time, but obviously a fair price.
Only a few years ago, it seemed as if the German politicians still had heads, and the then Minister of Economy told Trump to build better cars if he wanted to sell to the EU. https://www.marketwatch.com/story/german-minister-to-trump-after-tax-threat-the-us-needs-to-build-better-cars-2017-01-16
Most of what comes out of the US is either worse on the market:
TÜV Report 2025: Tesla comes last in the defect report
https://www-adac-de.translate.goog/news/tuev-report-2025/?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=wapp
or a scam based on legal arbitrage: Uber, Amazon etc.
or crappified monopoly products: Microsoft, Google etc.
There are very good reasons for not buying American.
The whole German IT infrastructure relies on US tech. Switch it off and everything goes dark. Overnight. https://x.com/E_Boeminghaus/status/1892254992179834966
Of course the US saw to that in the first place. Microsoft, Google and a.s.o. owe their monopolies to Washington. Case in point Star Office if anybody remembers. It lives on as Open Office. The US can live without Europe but not Europe without the US. European politics remind me of the Truman show…
Star Office and Open Office are no more. Libre Office is the actively-maintained open source software which entirely replaces Microsoft products – for free.
Agree.
Warren Mosler would be having a right old chuckle at the premise that Europeans are “ripping off” Americans by shipping them so much actual, tangible stuff in exchange for $USD.
The real error is made by US policymakers who in turn don’t find work for Americans disemployed in this exchange. This is an ongoing own goal that Trump apparently believes can be overcome by scoring into his own empty net in an entirely different way …
Europe, and all the other countries facing sanctions should make the case to Trump about trade being goods and tradeable services. They should also talk about the quality and price of American goods and that countries have a right to exclude certain types of food that they have decided are not healthy.
The US has run trade deficits for about 50 consecutive years and it is paying for its excess consumption by exchanging US dollar debt. Instead of trade partners buying American goods and services with their US earnings they are buying more debt, real estate and shares in companies. I suspect that this was one of the reasons that Obama bailed out the banksters instead of the people during the Great Recession, the US has to be an attractive place for foreigners to put their money or the dollar would fall in value and that would lead to more trouble.
Perhaps I am biased, but I feel that American companies are fatally lacking in the ability to tailor their products to the tastes of countries other than the U.S., and only export products that Americans prefer as is.
Our European friends have always refused to purchase US food in their grocery stores. They’ve learned how to distinguish between European food and US food. It’s all on the labels which our friends scrutinize very carefully.
They’re not stupid, you know.
Assuming that the US shifts the trade balance, what happens with the USD ? With less USD distributed around the world i would imagine more debt defaults around.
An outlier from me that perhaps just reinforces the article.
I can think of one US product that I have bought multiple times, have been very pleased with, and have sought out over and above European brands.
That is – Lodge cast iron cooking equipment. The big heavy skillet is wonderful. As is the griddle pan, and I have a few others on the wish list.
but… this is hardly high tech.
When it comes to cars? no. Korean if I am paying out of my own money or second hand German.
Food? not really. maybe there are some luxury US goods but there is plenty of that in europe.
Tech? only because of the lack of choice
Media? I am trying to get a more balanced watching and culture mix.
Films? there is only so many times you can watch the same plot.
I do like quite a few US sitcoms though. Brooklyn 99 is funny. Simpsons years ago, Big Bang theory. I think there are some great comedy series from the US.