President Donald Trump said on Friday that he will increase the tariffs charged on cars and trucks from the European Union next week to 25%, a move that could jolt the world economy at a fragile moment.
Trump said in a social media post that the EU “is not complying with our fully agreed to Trade Deal,” though he did not flesh out his objections in the post.
Trump and European Commission President Ursula von der Leyen had agreed to the trade deal last July. It set a tariff ceiling of 15% on most goods, though the Supreme Court this year ruled against the legal authority that Trump had used to charge that tax. This left Trump looking for substitute authorities, and his administration has imposed a 10% tax while investigating trade imbalances and national security issues to put in new tariffs to make up for lost revenues.
The tariffs hit at a moment when the Iran war has crushed the world economy with expectations of slower growth and higher inflation, as oil and natural gas prices have risen due to the effective closure of the critical Strait of Hormuz after strikes by the U.S. and Israel began at the end of February.
At the same time, Trump faces political pressure in the U.S. going into November’s midterm elections because of rising levels of inflation. Trump, a Republican, returned to the White House last year on the explicit promise that he could quickly tame prices that jumped in the aftermath of the government’s response to the coronavirus pandemic, but higher energy costs pushed annual inflation in March to 3.3%, which was higher than what he had inherited.
Just 30% of U.S. adults approved of Trump’s handling of the economy, according to the latest poll by The Associated Press-NORC Center for Public Affairs.
Both the U.S. and the EU had previously confirmed their commitment to preserving the trade framework, known as the Turnberry Agreement, which was named after Trump’s golf course in Scotland.
The status of the 2025 deal was first cast into doubt after the Supreme Court this year ruled that the president lacked the legal authority to declare an economic emergency and charge tariffs on goods from the members of the EU and other states. The alternative tariffs being explored by the Trump administration could ultimately put the agreement with the EU in risk of violation, though European Commissioner for Trade and Economic Security Maroš Šefčovič told reporters last week that the relationship with the U.S. had become more positive over the past year.
The EU had said it expected the bilateral deal would save European automakers about 500 million to 600 million euros ($585 million to $700 million) a month.
The value of EU-U.S. trade in goods and services amounted to 1.7 trillion euros ($2 trillion) in 2024, or an average of 4.6 billion euros a day, according to EU statistics agency Eurostat.
“A deal is a deal,” the European Commission said in February after the Supreme Court ruling. “As the United States’ largest trading partner, the EU expects the U.S. to honor its commitments set out in the Joint Statement — just as the EU stands by its commitments. EU products must continue to benefit from the most competitive treatment, with no increases in tariffs beyond the clear and all-inclusive ceiling previously agreed.”
—Josh Boak, Associated Press