TARIFFS: Europe To Respond To US Later, Watching Pharma Developments
Apr-03 01:03
While Canada and Mexico were excluded from the US’ reciprocal tariffs, other non-Asian countries were targeted with rates above the minimum 10% set. USCMA compliant exports will continue to face 0% including autos and parts but non-compliant items face 25% and energy 10%. The EU provided 18.5% of US imports in 2024 and ran a surplus of $235.6bn rising $27bn from 2023 thus it isn’t surprising that it was targeted with a 20% tariff.
US merchandise trade US$bn 12m sum
Source: MNI - Market News/Refinitiv
- With the main sources of US imports facing an import tax of between 20% and 54%, imported inflation is likely to rise directly in the US and indirectly to others through supply chains. The question for central banks is if there will be second round effects.
- The euro area is the largest source of US imports with Germany the greatest provider. Around 16.7% of euro area exports went to the US worth 3.2% of 2024 GDP and tariffs will hurt specific sectors significantly, especially autos which will continue to face 25% (10.2% of 2024 US auto imports came from the EU). But the east coast of the US receives refined products from Europe and a 20% tax is likely to impact retail fuel prices materially.
- EU President von der Leyen will respond later today but some sectors including chemicals have requested that the region not retaliate. The group is likely to negotiate with the US and reduce some of its own barriers in a deal.
- Ireland is particularly exposed to pharmaceuticals accounting for almost 30% of US imports. The US said that tariffs on chips, pharmaceuticals, timber and copper are coming soon.
- The UK receives the minimum 10% as it runs a small deficit with the US but around 2% of GDP is exposed.
- Switzerland though faces 31%. This is likely to hurt the alpine economy with 13.4% of its 2024 exports going to the US worth 6.4% of GDP. It is also the second largest supplier of US pharmaceutical imports.
US imports by country % total 2024
Source: MNI - Market News/ITA
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