Executive summary

On 2 April 2025, US President Trump gave a press conference in the Rose Garden to announce reciprocal tariffs. This announcement followed a February 2025 presidential memorandum (the Memorandum) ordering the Office of the US Trade Representative (USTR) and the Department of Commerce to initiate investigations of "harmful" nonreciprocal trade arrangements by foreign trading partners.¹ Based on the conclusions in this report, EU-originating goods exported to the US will be subject to an additional ad valorem rate of duty of 10% as of 5 April 2025 and this duty rate will be increased to 20% as of 9 April 2025.

The EU is preparing to retaliate against these additional tariffs, but EU leaders have indicated that the bloc will remain ready to negotiate with the US to remove any remaining barriers to Transatlantic trade.²

Detailed discussion

Background

The results of the USTR's investigation of "harmful" nonreciprocal trade arrangements by foreign trading partners can be found in the 2025 National Trade Estimate Report on Foreign Trade Barriers (NTE).³

In the NTE, the USTR provides an inventory of what it finds to be the most important foreign barriers affecting US exports of goods and services, including (1) agricultural commodities and US intellectual property; (2) foreign direct investment by US persons, especially if the investment has implications for trade in goods or services; and (3) US electronic commerce. In the EU section of the NTE, a broad range of legislation is listed as foreign barriers affecting the US. Examples include the Carbon Border Adjustment Mechanism (CBAM); EU Anti-Deforestation Regulation; Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH); Fluorinated Greenhouse Gas (F-Gas) Regulation; Packaging and Packing Waste Regulation; Medical Devices and In-Vitro Diagnostics Regulation; and Digital Service Taxes (DSTs) in particular EU Member States.

Reciprocal tariffs on EU exports

All articles imported, besides those listed in Annex II of the Executive Order (see below), into the customs territory of the US, among them EU originating goods, shall be subject to an additional ad valorem rate of 10%. This baseline tariff will be effective at 12:01 a.m. (ET) on 5 April 2025 and apply in addition to any other applicable duties or tariffs.

Effective 12:01 a.m. (ET) on 9 April 2025, the United States will impose country-specific tariff rates on goods imported into the US and originating from certain trading partners, which will apply even if goods are imported under a free trade agreement (except the US-Mexico-Canada Agreement (USMCA)).⁴ As a result, the country-specific tariff rate for the EU will increase to 20%.

The country-specific tariff rates will be decreased to the baseline tariff if the EU barriers mentioned in the NTE are removed.

Exceptions

The Executive Order exempts certain goods from the additional tariffs:

1. Goods set forth in Annex II of the Executive Order are not subject to the new reciprocal tariffs under the order.⁵ This list includes goods like steel and aluminum articles subject to Section 232 tariffs (and future goods subject to these tariffs); automobiles and automobile parts; copper; pharmaceuticals; semiconductors; lumber articles; certain critical minerals; and energy and energy products.
2. Goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before the reciprocal tariffs take effect will not be subject to the baseline or country-specific ad valorem tariffs.
3. Imports of goods originating from Belarus, Cuba, North Korea and Russia will be exempt.
4. Canadian- and Mexican-origin goods will not be subject to the reciprocal tariffs as long as Trump's existing executive orders remain in place.
5. If an article imported into the US contains at least 20% US content, then the additional tariff applies only to the non-US content. "U.S. content" means the value of an article attributable to the components produced entirely, or substantially transformed, in the United States.

EU responses

In her written response to the universal tariffs by the US, EU Commission President Von der Leyen said:⁶

And I am ready to support any efforts to make the global trading system fit for the realities of the global economy.

But I also want to be clear: Reaching for tariffs as your first and last tool will not fix it.

That is why, from the outset, we have always been ready to negotiate with the US, to remove any remaining barriers to Transatlantic trade.

At the same time, we are prepared to respond.

We are already finalizing a first package of countermeasures in response to tariffs on steel.

And we are now preparing for further countermeasures, to protect our interests and our businesses if negotiations fail.

With the first countermeasures package, Von der Leyden refers to the two-step reaction from the EU on the implementation of the 12 March 2025 steel and aluminum tariffs. The two-step reaction from the EU is to:

1. Reinstate commercial policy measures that were adopted in 2018, during Donald Trump's first administration, and had been suspended since 2022. These measures will take effect again as of 15 April 2025 and will target imports of certain products originating from the United States. The targeted products include bourbon, certain textile products, specific steel and aluminum products, motorbikes and boats. It is important to note that Annex II to the EU's 2018 countermeasures will also become applicable for the first time — the annex had not been implemented prior to the 2022 suspension.
2. The EU has published a nearly 100-page document listing tariff codes that could be subject to new additional tariffs. The value of the targeted imports totals approximately €18b, encompassing a wide variety of both industrial and agricultural products. This list has served as the basis for a consultation process running until 26 March 2025. Based on the input received from stakeholders, the European Commission is preparing an implementing regulation to be adopted following a consultation process with the various EU Member States. The European Commission anticipates that the new measures will ultimately enter into force in mid-April.

In addition to the two-step approach, the EU will further prepare for countermeasures if negotiations fail.

What should businesses do?

First and foremost, it will be crucial for businesses to assess the potential impact of the two-step reaction proposed by the European Commission and any other counter measures the EU is preparing. Companies must evaluate the extent to which they have recently imported or expect to import products covered by commodity codes for which additional measures are being reimposed or could be imposed (to the extent these codes are already known).

It is critical for businesses to ensure that customs tariff classifications as well as non-preferential origin and US-content details are accurate through all stages in the value chain. Companies must also review customs guarantees and payment balances for sufficiency.

Given the expected impact, companies should investigate potential mitigation strategies. In general, analyzing the elements included in the customs value, utilizing special customs procedures and reviewing sourcing strategies may help to decrease, defer or eliminate the impact of the commercial policy measures. In doing so, it is essential to take an end-to-end perspective on the supply chain and to approach this from a multidisciplinary standpoint involving trade, supply chain and direct tax functions.