Recently, the new U.S. administration has frequently issued tariff threats. Initially, it announced tariffs on all imported steel and aluminum, then demanded relevant departments to determine "reciprocal tariffs" with each foreign trade partner. Subsequently, it has been rumored to impose tariffs of approximately % on imported automobiles, chips, pharmaceuticals, as well as imported timber and forestry products, which has provoked strong reactions from the EU and several European countries.

Observers believe that the measures taken by the United States will severely impact key industries in Europe, disrupt the market, undermine business confidence and investment, and further exacerbate the economic growth challenges in Europe.

The steel and automotive industries are facing deteriorating conditions.

Observers point out that the threat of U.S. "tariff sticks" is adding insult to injury for the already struggling economies of many European countries, with key industries such as steel and automobiles bearing the brunt. The U.S. imposition of % tariffs on steel and aluminum will significantly impact European exports, further worsening the situation of the European steel industry.

According to data from the European Steel Association, the United States is the second-largest export market for EU steel producers, with exports to the U.S. accounting for approximately % of the EU's total annual steel exports. Henrik Adam, President of the European Steel Association, stated that under the impact of U.S. tariffs, the EU could lose up to million tons of steel exports to the U.S. each year, most of which cannot be compensated by exports to other markets. He bluntly remarked, "This will have a devastating impact on the European steel industry."

The European automotive industry is also facing a life-and-death challenge. If the United States imposes approximately a certain percentage tariff on imported cars, the competitiveness of European cars in the U.S. market will significantly decrease, threatening the long-term development and transformation of the entire industry. Moody's, an international credit rating agency, analyzed that about half of the European brand cars sold in the U.S. are imported, with European car brands such as Germany's Volkswagen and Sweden's Volvo, which have larger import shares and sales in the U.S., being more sensitive to tariffs.

Germany is the EU country with the highest volume of car exports to the United States. The German Association of the Automotive Industry strongly opposes the planned tariff measures by the U.S. government. The association points out that imposing higher tariffs on EU cars harms the interests of both Europe and America, and that isolationism only results in a lose-lose situation. Global trade conflicts pose significant risks to the world economy, and the impact of tariffs in the automotive industry will affect the entire supply chain, imposing greater burdens on businesses and consumers.

Increased uncertainty in financial markets and investment

The impact of U.S. tariff measures on the European economy is not limited to trade; it will also cause significant fluctuations in European stock and currency markets. Recently, news about U.S. tariffs has repeatedly impacted the European market. On a specific date, the first trading day after Trump announced tariffs on products imported from Canada, Mexico, and other countries, European automotive stocks experienced noticeable volatility, and the Euro Stoxx Index, which measures the performance of European stock markets, recorded its largest single-day drop in years. On another specific date, after Trump announced a tariff on all U.S. imports of steel and aluminum, stock prices in related European industries fell accordingly.

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets in the UK, pointed out that the European economy is highly correlated with U.S. trade policies, and the shift in trade policies has deepened investors' concerns about future prospects, which is the main reason for the decline in European stock indices. In the foreign exchange market, the introduction of tariff policies has heightened market risk aversion and inflation expectations, driving the U.S. dollar stronger and the euro weaker. Analysts note that while the depreciation of the euro against the dollar may stimulate exports in the short term, the high tariffs imposed by the U.S. could negate the trade advantages brought by the weaker euro. At the same time, Europe needs to import energy and other dollar-denominated raw materials and semi-finished goods at higher prices, which will increase inflationary pressures in the eurozone and raise production costs for businesses and living expenses for the public.

Additionally, the Swiss Union of Private Banks has published an article stating that the uncertainty surrounding tariffs poses a greater threat to investment and growth than the tariffs themselves. If the global economy falters, the most significant impact may not be on trade flows but on business confidence. The UK's Oxford Economics believes that escalating trade frictions between Europe and the US will affect European investment. The institution predicts that by the end of the year, private investment levels in the Eurozone will drop by nearly a percentage point due to trade conflicts.

Europe's economic growth prospects are bleak

Many Europeans are concerned that U.S. tariff policies will further encourage some companies to relocate their production lines from the European continent to the United States, exacerbating the outflow of key industries from Europe. The European Central Bank warned in its recent economic bulletin that escalating global trade frictions and regulatory barriers are dragging down economic growth in the eurozone, and new tariff policies are posing challenges to economic and trade development.

To cope with the impact of tariffs, some European companies have indicated they are considering increasing their investments in the United States. According to Reuters, French tire manufacturer Michelin plans to accelerate its investments in the U.S., and French luxury goods giant LVMH is also willing to increase production in the U.S. Analysts point out that tariffs in the automotive industry may prompt German car manufacturers Porsche and Audi to establish factories in the United States.

European Commission's Trade Commissioner Valdis Dombrovskis recently stated at a Eurogroup press conference that the uncertainty brought by U.S. trade policies has significantly increased and is negatively impacting global economic players, including the European Union. In his view, the uncertainty in U.S. policies has, on one hand, constrained investment and diminished the prospects of the EU economy receiving external stimuli; on the other hand, energy prices have risen again under these circumstances, dragging down the recovery outlook for the European economy. It is anticipated that the EU's economic growth rate will be lower than the level forecasted in its autumn predictions.

An imminent new trade war could push the eurozone economy from slow growth into recession, with European economic growth expected to remain sluggish in the coming years. Dutch ING economists Carsten Brzeski and Inga Fechner stated in an article published on the ING official website that protectionism is generally detrimental to economic development, especially for export-oriented economies. Even before tariffs take effect, the uncertainty associated with protectionist trade policies can impact market sentiment. "The shock of a second Trump term on the European economy could be more severe than during his first term," the article noted.