US Tariffs Loom Over EU Economies, Threatening GDP and Trade
Increased US tariffs threaten significant economic impacts for EU member states, especially Germany and Ireland.
Key Points
- • Germany faces a potential 0.4% GDP loss from US automotive tariffs.
- • Ireland's pharmaceutical sector could face tariffs up to 200%, risking significant economic repercussions.
- • The overall EU economy might see a decline of 0.3% depending on negotiation outcomes.
- • Forecasts indicate Ireland could suffer a cumulative GDP loss of 3% by 2028 due to tariffs.
As the United States prepares to implement increased tariffs on imports, the economic landscape for EU member states, particularly Germany and Ireland, is expected to face substantial challenges. On July 11, 2025, reports highlighted that the automotive and pharmaceutical sectors are disproportionately vulnerable to these tariff increases, which may yield significant GDP losses for the affected countries.
Germany is notably at risk, with projections indicating a potential long-term GDP reduction of 0.4% due to a new 25% tariff on car imports that has already been instituted. The German automotive sector, a linchpin of the nation's economy, is facing these tariffs without significant exemptions, raising the stakes for the country's export-driven market. Analysts warn that the complete absence of major exemptions for the automotive sector could lead to severe ramifications over the next several years.
Ireland, meanwhile, could be affected even more acutely, as proposed tariffs on pharmaceuticals may rise to as high as 200%. This is particularly concerning for Ireland, which sends over half of its goods exports to the US. The ramifications of such tariffs could lead to a cumulative GDP loss estimated at 3% by 2028, creating a critical situation for its economy, which heavily relies on the pharmaceutical sector, responsible for 15% of all EU exports to the US.
Overall, the EU economy could shrink by approximately 0.3% in the wake of these tariffs, contingent on the results of ongoing negotiations between Brussels and Washington. Initially, in 2024, the US accounted for 20.6% of all EU exports. The potential for an 8% drop in trade volume over the next five years has also heightened concerns within smaller economies like Denmark and Belgium, exposing them to indirect repercussions from these protective measures.
As uncertainties regarding these tariffs mount, fears of diminished investments and employment opportunities across the broader EU economy grow, with France and Spain also likely to feel the impacts despite not being the most affected countries. The overall economic outlook remains pessimistic as the region braces for potential changes that could reshape its trading relationships with one of its largest partners, the United States.