US President Donald Trump has issued an abrupt threat to impose a 50% tariff on European Union goods, but the market appears to have largely shrugged off the announcement. The Stoxx Europe 600 index closed down 1% on Friday, a significantly smaller drop than expected.
Analysts believe that Trump’s threat is more of a negotiating tactic rather than a policy in stone. Barclays’ global chairman of research, Ajay Rajadhyaksha, stated that “we are guessing here – as is everyone else” that the tariff will not be implemented. Instead, tariffs may settle at around 10%, with some analysts forecasting higher rates.
A 50% tariff would have significant economic implications for both the EU and the US. The US imported $606 billion in goods from the EU in 2024, which could lead to a $300 billion hit if fully implemented. However, many experts believe that Trump’s threat is designed to extract concessions rather than be taken literally.
The EU has prepared retaliatory measures in response to previous tariff threats, including tighter regulations on US tech firms and restrictions on public procurement access. If the US tariffs were to go into effect, it could result in a substantial fall in GDP in Germany and potentially higher in Ireland.
Despite the aggressive rhetoric, many analysts believe that Trump’s strategy is to “escalate to de-escalate”. Markets and EU policymakers will likely be watching the situation closely, hoping that this is a move by Trump to unlock trade talks rather than a permanent situation.
Source: https://www.cnbc.com/2025/05/23/why-investors-calling-trumps-bluff-on-50percent-tariffs-on-european-union.html