Trade between the US and the European Union (EU) became a focus over the last week, as the EU on March 11 announced retaliatory tariffs, in response to US tariffs on steel and aluminum imports from all countries, which went into effect March 12.

Targeted retaliation: The EU’s retaliatory tariffs will cover about $28 billion of US goods, in two phases. The first phase will take effect April 1, with the EU largely targeting finished consumer and agriculture products that it imports from the US, including: beef, poultry, motorcycles, bourbon, peanut butter, and jeans. The EU also proposed a second wave of tariffs against further US imports to go into effect mid-April.

Transatlantic trade in perspective: The US and 27-member EU have the world’s largest bilateral trade and investment relationship. In 2024, a total of $975.9 billion worth of goods were traded between the two markets:

• US goods exported to the EU totaled $370.2 billion, up 0.7% from 2023.
• EU goods imported to the US totaled $605.8 billion in 2024, up 5.1% from 2023.
• This resulted in a US goods trade deficit with the EU of $235.6 billion in 2024, a 12.9% increase over 2023.
• Unlike with Canada and Mexico, the US does not have a free-trade agreement (FTA) with the EU. Negotiations for an FTA were launched in 2013, stalled, and were formally closed in 2019 without a conclusion.

More tit-for-tat to come? In response to the EU’s retaliatory tariffs, the White House has referenced further levies on EU products, such as a 200% tariff on wine and champagne. It is expected that tariffs on EU goods will be part of the US Administration’s look into 200+ economies and roll-out of a program of “fair and reciprocal” tariffs April 2.

The TCB take: Thus far, the EU has announced plans to levy tariffs on mostly US consumer end-products. However, Phase 2 and future tariffs will likely be broader and focus on industrial and energy products—the highest-value US exports to the EU.

In short, it’s not just about jeans and wine. US and global businesses need to prepare for higher costs, and a weakening market for major US exports. The most valuable US products exported to the EU include: 1) petroleum oil, crude, 2) medicine and pharmaceuticals, 3) engines and motors, non-electric, 4) aircraft and associated equipment, and 5) natural gas.