US-EU Tariff Wars: 2018 & 2025 - A Comprehensive Report

11 Apr

The United States and the European Union – two of the world’s largest economies – have clashed in high-profile tariff wars in recent years. In 2018, the Trump administration imposed sweeping tariffs that sparked immediate retaliation from the EU, straining transatlantic trade relations. A few years later, in 2025, a new round of U.S. tariffs (largely a revival and expansion of the earlier measures) reignited tensions. These disputes centered on strategic industries and had ripple effects on economic indicators and jobs. Below is a deep-dive analysis of the 2018 and 2025 tariff wars, covering the industries involved, economic impacts, tit-for-tat measures, effects on prices and supply chains, and efforts made to resolve the conflicts.

Industries Involved & Their Economic Significance

US-EU Trade Balance, Sectoral Trade Trends, and USD-EURO Exchange Rate (2000-2025). It illustrates the US-EU trade balance trends and sector-wise exports (Steel, Aluminum, Automobiles, Agriculture, Machinery, Chemicals) to highlight fluctuations and sectoral impacts. The impact of the 2018 & 2025 Tariff Wars is marked with shaded areas, while the USD-EURO Exchange Rate is plotted on a secondary axis to show currency shifts. This provides a comprehensive overview of trade patterns, economic impacts, and currency movements over time.

2018 – U.S. Targets Metals, EU Hits Iconic Products

The 2018 conflict was triggered when the U.S. targeted the metals industry, imposing tariffs of 25% on steel and 10% on aluminum imports (citing national security concerns) . The EU is a major steel supplier to the U.S. – about $7.2 billion of EU steel and aluminum exports were affected . Steel and aluminum are foundational industries: they not only employ steelworkers and smelter workers, but serve as critical inputs for autos, aerospace, construction, machinery, and consumer goods. In the U.S. alone, over 12 million jobs are in industries that use steel in production (nearly 2 million in highly steel-intensive sectors) , underlining how broadly these tariffs could reverberate through the economy. The EU’s retaliation in 2018 deliberately targeted iconic American products across various industries – aiming to exert political pressure. Brussels’ list included items like motorcycles (e.g. Harley-Davidson bikes), bourbon whiskey, blue jeans (Levi’s), peanut butter, orange juice, and cranberries . These products are symbolically American and economically significant in certain regions (for example, whiskey is a key export of Kentucky and Tennessee). While the overall trade value of any single targeted consumer product was modest (American whiskey exports to Europe were around $700 million annually before tariffs), they were chosen for maximum visibility. In fact, U.S. whiskey makers quickly felt the pinch – their exports to the EU dropped roughly 20% after Europe’s 25% duty hit in 2018 , illustrating the impact on that industry. By focusing on niche but high-profile industries, the EU retaliation sought to pressure U.S. leaders by hurting specific constituencies (e.g. farmers, Harley riders, whiskey distillers) without immediately disrupting bulk trade like aerospace or pharmaceuticals.

2025 – Focus Returns to Metals (& More)

The 2025 tariff flare-up again centered on steel and aluminum, with the U.S. re-imposing a 25% tariff on all imported steel and aluminum – effectively ending a prior truce that had granted limited exemptions . This time, the U.S. went even further by expanding tariffs to downstream products made with these metals. Hundreds of items – from industrial components like nuts, bolts, and bulldozer blades to everyday goods like soda cans – were suddenly subject to import taxes . The inclusion of downstream metal products greatly broadened the industries involved, pulling in sectors like machinery manufacturers, automotive parts, and canned goods producers into the fray. There was even talk of new tariffs on raw materials like copper , indicating the U.S. was widening the scope beyond just steel/aluminum. The EU’s response in 2025 targeted a wider range of U.S. goods to match this escalation. Brussels announced plans for tariffs on €26 billion worth of U.S. exports – a far larger sum than in 2018 – to “rebalance” the trade loss. This would include reinstating the previously suspended tariffs on items like bourbon whiskey and big motorcycles, and adding new levies on other products. Notably, the EU signaled tariffs on categories such as American other spirits (liqueurs, vodka, etc.), cosmetics and beauty products, and essential oils . Those sectors were chosen in part because Europe actually runs a trade surplus in them (for example, Europe exports far more cosmetics to the U.S. than it imports ), so EU industry feared the risk of tit-for-tat retaliation. In sum, the 2025 war still pivots on metals (a strategically and politically sensitive industry for both sides) but has entangled a broader swath of products. The industries involved – from heavy metals and manufacturing inputs to luxury consumer goods – are economically significant: steel/aluminum are crucial for infrastructure and defense, while products like spirits and cosmetics involve major multinational companies and supply chains. Both the U.S. and EU chose tariff targets with economic and political weight, aiming to maximize leverage without immediately crippling their own critical import needs.

Impact on GDP, Trade Balances, & Employment

Economic & GDP Impact of US-EU Tariff Wars (2018 & 2025). It highlights the slowdown in US & EU GDP growth, along with sector-specific trends in manufacturing, agriculture, and services. The graph also tracks stock market reactions, showing fluctuations in the S&P 500 and European indices after tariff announcements. Tariff periods (2018 & 2025) are marked in gray, illustrating how tariffs impacted economic growth, industry trends, and investor confidence.

Macroeconomic Impact (GDP Growth & Trade Flows)

The tariff wars imposed costs on overall economic growth, though the impact was more a drag on growth rates than a full-blown contraction. In 2018–2019, increased tariffs and the uncertainty they bred weighed on investment and industrial output, according to analyses by the U.S. Federal Reserve and international organizations . Business confidence took a hit as firms faced an unpredictable trade environment, and global growth forecasts were trimmed in response. For example, by late 2019 manufacturing activity had slowed in both the U.S. and EU, in part due to trade tensions. Germany (with its export-heavy economy, especially autos) narrowly avoided a recession, and U.S. manufacturing fell into a mild slump. The U.S.-EU tariffs themselves were only one piece of a larger pattern of trade disputes (the U.S.-China trade war was also raging), but they contributed to an environment of heightened risk that likely shaved fractions of a percent off GDP growth on both sides. Notably, investor and consumer confidence were rattled, and there were even “recession fears” amid the escalating trade barriers . In terms of trade balances, the tariffs did not achieve the U.S. goal of reducing its deficit with Europe. While U.S. imports from the EU did fall in some categories (e.g. steel), U.S. exports also fell due to retaliation, and consumers found alternative sources (or paid higher prices) for restricted goods. In fact, the U.S. goods trade deficit with the EU increased to record levels in subsequent years – reaching about $235.6 billion in 2024, a ~13% increase over the prior year . This was a clear indication that broader economic forces outweighed the tariff measures; strong U.S. demand and a competitive EU export sector kept the imbalance large. On the European side, overall exports to the U.S. dipped only slightly in 2018–2019 because many major categories (like pharmaceuticals, machinery, aircraft) were not directly targeted. However, EU steel and aluminum exports to the U.S. plummeted – declining 53% between 2018 and 2020 as the tariffs priced EU metal out of the U.S. market . Those lost sales contributed to a slight widening of the EU’s trade surplus with the U.S. (since the EU was simultaneously importing less from the U.S. due to retaliation). Specific export industries in the U.S. saw sharp declines: for instance, American whiskey exports to Europe, which had been booming, fell by roughly 20–30% in the wake of the EU’s 2018 tariffs . U.S. agriculture also took a minor hit – products like certain fruits, wine, and maize derivatives saw lower EU sales. Overall, the macro impact of the U.S.-EU tariff war was to moderately slow growth and alter trade flows, but not to upend the overall trade balance trends (which continued to be driven by structural factors and demand). The newly rekindled 2025 tariff fight similarly poses a headwind to growth: early estimates warned that a full escalation could shave a few tenths of a percent off EU GDP growth and a similar amount off U.S. growth over the short term, mainly by denting manufacturing output and investment.

Price & Inflationary Impact of Tariffs on Key Consumer & Industrial Goods (2015-2025). It highlights the US & EU Steel and Aluminum Price Index, showing the effects of tariff wars on raw materials, along with CPI changes for whiskey, motorcycles, clothing, automobiles, and food. The graph also compares US-EU automobile prices, illustrating how tariffs influenced vehicle costs, with tariff periods (2018 & 2025) marked for reference. This provides insights into inflationary effects, pricing disruptions, and industry-specific tariff impacts.

Employment Effects

Trade wars inevitably create winners and losers in the job market, and the net effect in these cases has been negative for both the U.S. and EU. In the U.S., tariffs provided a boost to employment in protected industries (steel and aluminum smelting) but at the expense of larger downstream sectors. U.S. steelmakers did ramp up production after the 2018 tariffs – capacity utilization rose and some mills hired more workers – but these gains were relatively small (a few thousand jobs at most). Meanwhile, companies that use steel/aluminum as inputs saw higher costs, which constrained hiring and in some cases led to layoffs. One economic study projected that the 2018 tariffs on steel and aluminum would result in a net loss of ~146,000 U.S. jobs, even after accounting for any jobs gained in metal production . When U.S. trading partners retaliated in kind, the estimated damage rose dramatically – up to 470,000 U.S. jobs lost in a full trade war scenario . In effect, for every job “saved” or created in metals, many more were lost in sectors like fabricated metals, autos, and appliances. Real-world data in 2019 appeared to validate these concerns: a Federal Reserve study found that by mid-2019, U.S. manufacturing employment was 0.6% lower than it would have been without the tariff hikes, which translates to about 75,000 fewer manufacturing jobs attributable specifically to the 2018 metals tariffs (this figure does not even count jobs lost in farming or other export industries due to retaliation) . Those job losses reflected factory owners cutting back as input costs climbed and export orders fell. On the EU side, the employment impacts were somewhat less immediate in 2018, but still notable in certain sectors. European steel producers, for example, faced reduced demand from the U.S. market – some mills in the EU scaled back shifts or production levels in response, affecting jobs (though the EU’s own safeguard measures helped prevent a flood of steel imports that could have caused deeper layoffs). More visibly, jobs in the specific sectors targeted by U.S. retaliation or at risk of future U.S. tariffs became a concern. (While the U.S. did not retaliate against the EU in 2018 beyond the metals tariffs, there were separate U.S. tariffs from other disputes, like duties on EU aircraft and foods in the Boeing-Airbus case, that impacted European workers in those industries.) European workers in industries targeted by the 2025 U.S. measures – such as specialty metal part manufacturers – could also be affected if they lose U.S. sales. Conversely, EU industries that were targets of their own retaliation (like bourbon distributors in Europe, or motorcycle importers) might have seen a slight dip in jobs due to reduced business, but these were minor. A bigger worry for Europe was the threat of auto tariffs in 2018: it was estimated that a 25% U.S. tariff on European cars could cost hundreds of thousands of European jobs (Germany’s auto industry alone employs over 800,000 people, and a big hit to U.S. exports would reverberate through the supply chain). Though auto tariffs were averted, the mere threat underscored how employment-rich sectors were caught in the crosshairs. By 2025, European officials and industry groups were again voicing alarm – for example, Europe’s cosmetics and spirits associations warned that the EU’s new tariffs (aimed at U.S. goods) could invite U.S. retaliation on European products, endangering jobs in Europe’s large spirits and beauty industries which enjoy a big trade surplus with the U.S. . In summary, employment in protected industries rose marginally, but far more jobs were put at risk in export-dependent and input-consuming industries. Both the U.S. and EU ultimately saw a net negative employment impact from the tariff wars, with job losses spread across manufacturing sectors and farming/export communities, even as a handful of politically important sectors (like U.S. steel mills) benefited in the short run.

Retaliatory Measures & Diplomatic Responses

U.S. Tariff Actions (Initiation & Threats)

In both 2018 and 2025, the United States was the side that initiated the tariff hostilities. In 2018, President Trump invoked Section 232 of U.S. trade law (national security) to levy blanket tariffs on steel and aluminum imports worldwide, including from EU allies . The tariffs – 25% on most steel products and 10% on aluminum – took effect in June 2018 for the EU (after a short exemption period lapsed). This bold move came with combative rhetoric: Trump argued European (and other foreign) metal imports were hurting U.S. industry and even tweeted that “trade wars are good, and easy to win.” Beyond metals, the Trump administration also launched an investigation into imported autos and auto parts as a security threat, openly threatening to hit European car imports with tariffs as high as 25%. In fact, in late June 2018, as soon as the EU’s counter-tariffs landed, Trump tweeted a threat to slap a 20% tariff on all EU car exports to the U.S. if the EU didn’t remove its trade barriers . This sent a chill through Europe’s automotive industry. Although auto tariffs were never actually implemented (more on the diplomacy that halted them below), the threat itself was a major point of leverage. Fast forward to 2025: after a few years of relative calm, the U.S. again escalated. The new tariffs in 2025 essentially restored and expanded the 2018 measures. The U.S. duty rate on steel and aluminum was pushed back up to a flat 25% on all imports, removing quota arrangements that had previously allowed some metal to enter tariff-free . What made 2025’s action more punitive was the extension of tariffs to downstream and related products – hundreds of tariff lines covering items made of steel/aluminum (such as nails, screws, wires, pipes, machinery parts, canned food containers) were now taxed . U.S. officials argued this was to close loopholes (preventing importers from bypassing raw metal tariffs by importing finished goods), but it marked an unprecedented broadening. Additionally, the U.S. hinted at new sectors under scrutiny – for example, the Commerce Department indicated tariffs on copper and perhaps other raw materials were on the table . President Trump (who, based on these actions, was back in office in 2025) even threatened more penalties on the EU if it retaliated, saying “Whatever they charge us, we’re charging them” . This tit-for-tat stance signaled that the U.S. was prepared to keep escalating with matching counter-retaliation on any EU goods, a posture that dramatically raised stakes compared to 2018.

EU Retaliatory Measures

The European Union answered U.S. tariffs in both episodes with a firm “tit-for-tat” strategy, aiming to retaliate in equal measure while staying within international trade rules. In 2018, the EU framed its response as “rebalancing measures.” It adopted tariffs on €2.8 billion ($3.3 billion) worth of U.S. imports starting June 22, 2018 – precisely calibrated to match the economic impact of U.S. metal tariffs on EU exports in that first year. Legally, the EU justified this under WTO rules allowing rebalancing against a member’s safeguard actions (though the U.S. insisted its tariffs weren’t “safeguards” at all). The targeted U.S. goods were carefully chosen for political and symbolic impact: iconic American brands and region-specific exports. This list of EU counter-tariffs (2018) included Harley-Davidson motorcycles, bourbon whiskey, Levi’s jeans, peanuts and peanut butter, orange juice, cranberries, corn products, steel pipes, and certain cosmetic products . The tariff rates ranged from 10% up to 25%, and even 50% on a few items (50% was applied to select goods like bourbon and motorcycles but was to kick in only if the dispute dragged on) . At the same time, the EU launched a case at the WTO disputing the U.S. metal tariffs’ legality . The EU also immediately prepared a second phase of retaliation: it notified the WTO of additional tariffs on up to €3.6 billion of U.S. goods to be implemented three years later (by 2021) if the metals dispute wasn’t resolved . This two-stage plan (totaling €6.4 billion) matched the full value of EU steel and aluminum exports that were hurt by the U.S. action . In practice, those additional tariffs were set aside when a truce was reached in late 2021, but the EU’s message in 2018 was clear – they were ready to counterpunch dollar for dollar. In 2025, after the U.S. reignited the trade war, the EU moved to hit back even harder than before. European Commission officials unveiled a package of tariffs covering €26 billion (≈$28 billion) of U.S. exports , an unprecedented amount in the transatlantic context. This massive retaliation reflects not only the value of trade at stake but also the broader range of U.S. products now being targeted. Key elements of the EU’s 2025 countermeasures include: (1) Re-imposing the tariffs that had been suspended during the truce – so bourbon whiskey, American motorcycles, jeans, etc., would again face high duties when entering Europe . (2) Extending tariffs to new product categories in response to the U.S. broadening the dispute. Reports indicated additional EU tariffs on other American spirits (like rum, vodka), wine (the EU had previously avoided taxing U.S. wine but considered it now), cosmetics and personal care items (makeup, skincare, perfumes from the U.S.), and even yachts or boat parts in some proposals. By including sectors like cosmetics and spirits, the EU was targeting areas where the U.S. exports relatively less than Europe – a strategic choice to pressure U.S. companies while minimizing collateral damage to EU exporters. Still, European industry groups were nervous: for example, spiritsEUROPE (association of European liquor producers) pointed out that the U.S. is the EU’s biggest export market for spirits (worth €2.9 billion in 2024) , so if the U.S. retaliated against EU whiskey or cognac, European producers would suffer. This highlights a difference in 2025 – the retaliation list was so broad that it risked entangling sectors where Europe had more to lose, indicating that the EU was running out of “safe” targets and was prepared to accept some mutual pain to stand up to the U.S. Alongside tariffs, the EU also continued its safeguard measures on steel (first introduced in 2018). These measures put quotas on steel imports into the EU (from all sources) to prevent global steel that could no longer enter the U.S. market from flooding Europe. Maintaining these safeguards in 2025 was a way to shield EU steelmakers from indirect harm caused by the U.S. actions. In summary, the EU’s retaliatory stance in both episodes was resolute: match the U.S. tariffs in scale, target politically sensitive exports, and use legal channels (WTO, safeguards) to justify its actions. The scale of retaliation grew from a few billion euros in 2018 to over €26 billion in 2025, mirroring the escalation of U.S. protectionism.

Diplomatic Responses & Escalation Management

Despite the heated rhetoric and rapid retaliation, both sides engaged in diplomacy to manage and eventually resolve the conflicts. In 2018, EU leaders were outspoken in condemning the U.S. move – European Commission President Jean-Claude Juncker famously quipped, “We can also do stupid”, referring to matching foolish tariffs with more tariffs . This quote encapsulated the EU’s mix of frustration and resolve. European officials coordinated closely with other U.S. trading partners like Canada and Mexico, who were simultaneously hit by the metal tariffs. The united front at forums like the G7 (where the dispute caused a major rift in June 2018) put pressure on the U.S., but real de-escalation came through one-on-one diplomacy. In July 2018, Juncker traveled to Washington, D.C. for a high-stakes meeting with President Trump, aiming to defuse the situation. The result was a surprise trade truce: the two leaders announced a joint approach to resolve tariffs and improve trade. Juncker pledged that the EU would buy more U.S. soybeans and liquefied natural gas (LNG) and work toward a deal of “zero tariffs” on industrial goods, in exchange for Trump agreeing to hold off on new tariffs (notably the threatened auto tariffs) . In a Rose Garden statement, both sides agreed to begin talks on broad trade issues and to refrain from further escalation while negotiations were ongoing . Notably, Trump did not remove the existing steel/aluminum tariffs at that time, nor did the EU remove its retaliatory tariffs, but the agreement to stop “firing new shots” was critical. This diplomatic move forestalled the automotive tariff threat that could have massively expanded the war. It also showed a path to negotiation: essentially, a political deal to talk things through, with each side giving the other something (Europe’s willingness to import U.S. soy/LNG was meant to address Trump’s concerns, and in fact EU purchases of U.S. soybeans jumped in the ensuing months ). While those specific trade talks later stalled, the immediate crisis was managed. The tone of diplomacy in 2018 was thus one of damage control – strong public rebuttals by the EU, quick retaliation to show resolve, and then private negotiations to cool tempers. There was also recourse to international arbitration: the EU (and others) brought the case to the WTO, and although the WTO would ultimately rule against the U.S. in late 2022, the U.S. appeal and the paralysis of the WTO Appellate Body meant no immediate resolution from that avenue.

In 2025, the diplomatic dynamic has some differences. The tariff war re-erupted presumably under another Trump administration, and early signs show tough talk on both sides. Trump signaled he would escalate further if the EU hit back , and the EU signaled it will hit back hard . The United Kingdom (no longer in the EU) found itself caught in the middle – British industries were also harmed by U.S. tariffs, but the UK, now on its own, debated whether to align with the EU’s retaliatory approach or tread softly to secure a trade deal with Washington . This created a complex diplomatic subplot in Europe’s response. The EU’s public stance in 2025 has been one of regret and resolve: EU officials criticized the U.S. for undermining the 2021 truce and have stated they “had no choice” but to retaliate to defend European interests. Privately, there are surely diplomatic channels trying to de-escalate. For instance, EU trade commissioners and U.S. trade representatives would be in communication, and there’s talk of restarting the suspended negotiations on steel/aluminum (focusing on a possible agreement on carbon-friendly steel trade, which was the goal of the earlier talks). Multilateral settings like G20 meetings offer venues for U.S.-EU discussions – other world leaders have an interest in mediating as well, since a trade war between the West’s biggest economies has global repercussions. As in 2018, WTO diplomacy is playing a role: the EU could seek authorization to retaliate (the WTO dispute from 2018 was decided in the EU’s favor, but the U.S. has not complied). However, given the WTO’s enforcement issues, this is more a moral victory than a practical solution. One notable aspect of 2025 is that the U.S.-EU tariff war is occurring despite both sides being longstanding allies, and it comes amid other geopolitical challenges (such as dealing with China’s trade practices or cooperation on security issues). This has added a diplomatic strain on NATO and transatlantic unity. European diplomats have tried to separate trade tensions from security cooperation, but it undoubtedly complicates the political atmosphere. In response to the U.S. escalation, EU nations have been rallying together – even countries like France, Spain, and Italy (which in 2025 initially had reservations about some retaliation targets like bourbon or cosmetics ) ultimately supported a united EU retaliation, recognizing the importance of showing a common front. There have also been calls on the U.S. side by domestic groups and politicians to resolve the fight: American importers and farmers lobby Congress to rein in the trade war, and some U.S. lawmakers openly question the wisdom of antagonizing allies, which creates internal political pressure for diplomacy. In summary, the diplomatic responses have involved a combination of retaliatory posturing and behind-the-scenes talks. In 2018, that produced a ceasefire and framework for negotiation. In 2025, at least as of now, diplomacy has yet to yield a new agreement, but both sides are likely using channels (and perhaps seeking an outside mediator or awaiting domestic political shifts) to eventually broker a resolution. The tone has ranged from fiery threats to sober negotiation, reflecting the challenging balance of defending national interests while avoiding an economically damaging all-out trade war.

Changes in Consumer Prices, Production Costs, & Supply Chain Disruptions

Consumer Prices

One of the most direct effects of tariffs is higher prices for consumers and businesses, and both the 2018 and 2025 tariff battles have led to noticeable price changes in certain goods. In the U.S., the 2018 steel and aluminum tariffs drove up the cost of those materials, which fed through into prices of products that use metal. For example, the price index for U.S. domestic steel spiked in 2018 as soon as tariffs hit – benchmark steel prices jumped significantly (at one point hot-rolled coil steel was ~25% more expensive than before the tariffs). Consumers might not buy raw steel, but they saw the impact in goods like cars, appliances, and canned foods. Analysts estimated that the tariff on steel added about $150-$200 to the production cost of an average car. In a competitive market, some of that was absorbed by manufacturers, but much of it would be passed on: new car prices in the U.S. did creep up, and one study identified a decline in auto sales in regions heavily hit by retaliatory tariffs, suggesting consumers were feeling the pinch . A very clear example was washing machines: although those were subject to a separate tariff safeguard (also in 2018), it illustrated the effect – washing machine prices for U.S. consumers jumped roughly 12% following the tariffs, the largest increase in laundry appliance prices in a decade. Similar logic applied to the metal tariffs and downstream goods. The U.S. government’s own analysis found that steel-intensive products saw price increases, which in turn dampened demand for those products . On the European side, consumers faced higher prices for select American imports. Bourbon whiskey in Europe became about 25% more expensive due to the EU’s retaliatory tariff. As a result, a bottle of Kentucky bourbon on a shelf in Paris or Berlin suddenly cost significantly more than it did pre-trade-war. Some consumers likely switched to alternatives (e.g. Scotch whisky, which had no extra tariff, or European spirits), leading to a drop in sales of the American version. Motorcycles imported from the U.S., like Harley-Davidsons, also cost thousands of euros more – the EU’s 25% tariff on big motorcycles added an estimated $2,200 to the price of each bike , a huge jump. Harley-Davidson dealers in Europe either had to raise retail prices or see their profit margins shrink dramatically. Jeans and apparel were also hit – a pair of American-made jeans or a T-shirt faced a 25% duty, which retailers would likely pass on to consumers. European shoppers might not have noticed too much since many apparel imports come from Asia, but niche “Made in USA” clothing became pricier. In general, the EU aimed its tariffs at goods where substitutes existed (European or other imports), so the consumer price impact in the EU was somewhat blunted by shoppers shifting to non-U.S. alternatives when possible. Nevertheless, the cost of U.S. imports rose in the EU, which for loyal customers of those products meant a hit to their wallets. By 2025, with the trade war expanding, consumers on both sides could see a broader impact. If the EU indeed slaps tariffs on U.S. cosmetics and hygiene products, European consumers might pay more for American-brand makeup or shampoos. Conversely, if the U.S. retaliates further by taxing European goods (like cosmetics or wine), U.S. shoppers could see higher prices for French perfumes or Italian wines. Overall, while these price changes were often localized to specific product categories, they exemplify how tariffs function as a tax that often trickles down to consumers. Inflation overall didn’t skyrocket solely because of these tariffs – they were too limited in scope to drive broad inflation – but in affected niches, price hikes were significant. This reduces consumer purchasing power and can shift consumption patterns (for instance, some European bourbon enthusiasts reportedly stocked up on their favorite bottles before the tariffs hit, and then cut back purchases during the tariff period).

Production Costs for Businesses

Tariffs also raised production and supply costs for companies, squeezing profit margins and forcing difficult choices about sourcing and pricing. In the U.S., many manufacturers suddenly faced more expensive inputs after 2018. Steel and aluminum are used in a huge array of industries: from auto parts and aircraft components to beer kegs and construction materials. When those input costs rose (domestic steel prices jumped because foreign competition was taxed), companies had to decide whether to absorb the costs, pass them to customers, or find alternative inputs. The burden was heavy – by one count, U.S. firms filed nearly 100,000 requests for tariff exemptions in the first year alone, pleading that they couldn’t get the specific steel/aluminum they needed domestically at a reasonable cost . This bureaucratic process left many in limbo (with a large backlog of requests still pending months later ). For big manufacturers, the tariffs meant tens of millions of dollars in extra expenses. Ford Motor Company’s CEO publicly stated that the metal tariffs were costing Ford about $1 billion in lost profit (due to higher steel and aluminum prices) . That is a huge hit, equivalent to the cost of a couple car assembly plants’ annual payroll. Other automakers and appliance makers echoed similar concerns. For smaller manufacturers, the impact could be existential: some reported that key components or specialty metals were now so costly or hard to obtain that they had to scale back production. In Europe, production costs were affected in a few ways. European steel producers lost some economies of scale as U.S. orders dried up, potentially raising their average costs (though many could redirect steel to other markets). More significantly, companies in Europe that used U.S. products targeted by EU retaliation had to adjust. For example, a European confectionery company that uses American peanuts or peanut butter would now pay 25% more for that ingredient, making their final candy more expensive to produce. Some niche manufacturers relied on specialized American inputs (certain chemicals or machinery); when those got tariffed, input costs rose for them too. However, because the EU’s retaliation list in 2018 was skewed toward finished consumer goods, the direct impact on EU manufacturers’ input costs was limited. In 2025, if the EU imposes tariffs on a wider range of intermediate goods (for instance, if some chemicals or components are on the list), then European firms could face higher costs similarly. Additionally, U.S. companies that export to Europe found themselves having to either eat the cost of tariffs or lose market share. Harley-Davidson, as noted, faced an extra $2,200 cost per motorcycle for EU-bound bikes . The company initially said it would not raise prices on dealers, effectively meaning Harley would absorb an estimated $90–100 million per year in tariff costs to keep its bikes competitively priced in Europe . That kind of cost pressure forced Harley (and others in similar positions) to reallocate resources – money that could have gone to hiring or R&D was instead spent offsetting tariffs. In many cases, businesses passed on costs to consumers partially, and absorbed some cost themselves, resulting in thinner profit margins. For some agricultural producers, the tariffs meant unsold inventory and wasted output (e.g. U.S. cranberry growers suddenly found the EU market less accessible and had to lower prices or find new buyers, reducing their income). All these adjustments represent inefficiencies and added costs introduced by the tariff war.

Employment & Investment Shifts in the US and EU Due to Tariffs (2015-2025). It showcases manufacturing employment trends across steel, auto, and machinery sectors, along with job gains in US steel and losses in US auto and machinery industries. The graph also highlights FDI trends, showing investment declines post-tariffs, and corporate reactions, including Harley-Davidson’s production shift and Ford’s steel-related cost impact. Tariff periods (2018 & 2025) are marked for reference, providing a clear view of employment, investment, and strategic shifts due to tariffs.

Supply Chain Disruptions & Reconfiguration

Perhaps the most profound impacts of the tariff wars have been the disruptions to global supply chains. Modern U.S.-EU trade is characterized by complex supply chains – parts and materials crisscross the Atlantic (and the globe) before final products are assembled. The 2018 tariffs forced companies to rethink sourcing strategies. Some U.S. manufacturers that depended on imported European steel or aluminum had to seek alternative suppliers, perhaps domestically or from countries not hit by tariffs (or those who had quota deals). This wasn’t always feasible, especially for specialized alloys or products where EU suppliers were world leaders. The result was production delays or redesigning products to use different materials. The EU’s protective steel quota (safeguard) meant that steel that might have been diverted from the U.S. to Europe now risked hitting quotas and incurring tariffs in the EU as well – this contained the flood somewhat, but it also meant EU steel consumers couldn’t simply import unlimited cheap steel from other global sources to replace U.S.-bound EU steel. Notable corporate decisions highlighted these supply chain shifts. In mid-2018, Harley-Davidson announced it would move some production out of the U.S. for motorcycles destined for Europe . The iconic American bike maker decided that rather than bear the long-term extra cost or lose the European market (its second-largest market), it would use overseas facilities (e.g. in Thailand, India, and Europe itself) to supply EU customers tariff-free. This was a striking example: a company moving manufacturing jobs out of the U.S. as a direct result of the U.S.-EU trade crossfire – exactly the opposite of the tariff’s intent. Harley estimated the 25% EU tariff would cost an extra $2,200 per motorcycle shipped from the U.S. , a burden large enough to justify shifting its supply chain. Similarly, other U.S. companies contemplated or undertook moves: some large equipment manufacturers started sourcing certain parts from U.S. suppliers (even if more expensive) to avoid tariffs, potentially altering supplier relationships. On the European side, there were fewer headline cases of shifting production, but European carmakers with U.S. factories (like BMW in South Carolina) feared that if autos got tariffed, they might have to scale back U.S. output or find workarounds. (In the end, auto tariffs were averted in 2018, so we didn’t see the worst-case disruptions there – like BMW or Mercedes cutting U.S. jobs to move production to Europe.) However, the Boeing-Airbus subsidy dispute, which overlapped timewise, did cause Airbus to consider U.S. production (to dodge U.S. tariffs on EU aircraft) and Boeing to consider more sourcing in Europe – an example of how companies adapt to tariff walls by “moving behind the wall.” By 2025, supply chain reconfiguration is again in play. If U.S. tariffs cover not just raw steel but also things like machinery and components from Europe, some American firms might try to source from domestic or non-EU suppliers. Conversely, European companies in affected sectors (say, a French cosmetics firm that sells a lot in the U.S.) might explore increasing production state-side to bypass any tariffs. These kinds of shifts can be costly – setting up new supply lines or factories – and don’t happen overnight, but if the tariff regime seems long-lasting, businesses will act. Aside from relocation, tariffs introduced logistical disruptions: companies rushed shipments to beat implementation dates (creating surges at ports), then saw lulls afterward. Some firms ended up hoarding inventory of tariffed inputs in case costs worsened. Others faced unexpected bottlenecks – e.g., a U.S. manufacturer might find that a special type of aluminum rivet it buys from Germany now falls under a tariff code and gets held up at customs or becomes more expensive. Lead times for orders grew as everyone from importers to freight forwarders adjusted to new paperwork and costs. There were also quality and compatibility issues when switching suppliers due to tariffs – not every type of steel or component is identical, and qualifying a new supplier can take time. These supply chain hiccups often meant delays in production schedules. In terms of aggregate effects, the trade war pushed some supply chains to become more regionally focused (e.g. U.S. companies looking to North American suppliers, and EU companies looking within Europe), reversing – at least temporarily – the globalization trend. However, such adjustments are not always efficient economically; they can lead to higher production costs or suboptimal sourcing. Another effect was inventory and warehousing costs rising as firms stockpiled or had to hold products longer. Small businesses were sometimes hit hardest, as they lacked the flexibility or supplier networks to easily switch or negotiate cost concessions. For instance, a small U.S. metalworking shop that relied on imported tool-grade steel from Sweden might suddenly face much higher costs and have few alternatives, potentially forcing it to cut back production or even lay off workers. On the consumer side, supply chain disruptions meant some products became harder to find or had limited availability. If a particular American niche product was hit by EU tariffs, European importers might just stop carrying it due to low demand at the higher price – effectively removing it from the shelves. Likewise, certain European gourmet foods subject to any U.S. tariffs (in the Airbus retaliation, things like French cheese and Italian olive oil had tariffs) saw reduced variety in U.S. stores. In 2025, if escalation continues, consumers might notice longer wait times or backorders for some durable goods that are imported. In summary, the tariff wars introduced friction into supply chains that had previously been smooth and cost-optimized. Many companies responded by adapting logistics, changing suppliers, altering production locations, or passing costs around – none of which is efficient, all of which add cost or delay. These disruptions illustrate how protectionist measures in one area can ripple throughout a tightly interconnected global production system, causing widespread adjustments and occasional chaos until businesses find a new equilibrium.

Resolution Efforts, Trade Negotiations, & Policy Adjustments

Retaliation & Tariff Escalation Timeline (2018 vs 2025). It highlights US tariffs on EU imports, covering steel, aluminum, and expanded goods in 2025, alongside EU counter-tariffs on US goods, including whiskey, motorcycles, machinery, and cosmetics. The graph also tracks US auto tariff threats in 2018 and 2025, as well as the rising number of WTO disputes and legal battles between both sides. Tariff periods (2018 & 2025) are shaded for reference, illustrating how the US-EU trade war escalated and evolved over time.

Resolving the 2018 Conflict

The 2018 U.S.-EU tariff war did not have an immediate, tidy resolution, but it set in motion negotiations that eventually led to a stand-down. After the July 2018 Trump-Juncker meeting established a ceasefire, U.S.-EU working groups began discussing a range of trade issues. The agenda was ambitious – aiming for “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,” as announced by Trump . In reality, progress was slow. Talks on removing industrial tariffs encountered familiar sticking points (e.g. the U.S. wanted the EU to cut its 10% auto import tariff and open its agricultural market, which the EU was hesitant to do; the EU wanted the U.S. to remove “Buy American” biases in public procurement, which was sensitive for the U.S.). One immediate resolution effort was the EU’s increased purchase of soybeans from the U.S. . Thanks to trade dynamics (a drought in Argentina and China’s tariff on U.S. soybeans at the time), EU imports of U.S. soybeans jumped, and Trump took credit for it as a win. The EU also began importing more U.S. LNG (helped by market trends), which was politically highlighted as a concession. These moves built goodwill. By late 2018 and 2019, formal negotiations for a limited trade agreement were underway – the two sides considered a deal that would eliminate tariffs on industrial goods. However, disagreements over including agriculture (the U.S. wanted to include it; the EU refused) meant those talks never concluded under the Trump administration. Instead, what happened were a few small deals: in 2019, the U.S. and EU agreed to a deal where the EU would drop tariffs on American lobsters, and the U.S. reduced tariffs on certain European consumer goods like ready-made meals and crystal glassware – a modest package . This was more a confidence-building measure than a resolution to the big issues. Meanwhile, the WTO case on the steel/aluminum tariffs proceeded. In 2020, a WTO panel was formed, and in late 2022 it ruled the U.S. had violated trade rules by using national security unjustifiably. The U.S. (both under Trump and later Biden) essentially rejected that ruling, maintaining that national security decisions are not subject to review – a stance that left the legal resolution in limbo, especially since the WTO’s appeals body was not functioning (due to U.S. blockage of appointments). So, the WTO path did not compel a solution, but it did validate the EU’s position. The actual resolution for 2018’s dispute came with a change in U.S. leadership. In 2021, the Biden administration, seeking to repair alliances, entered talks with the EU to end the steel/aluminum impasse. By October 2021, they reached an agreement to pause the trade war: the U.S. would suspend the 25%/10% metal tariffs on a certain volume of EU exports (implementing a quota system – EU steel and aluminum could enter the U.S. tariff-free up to a specified amount annually, roughly equal to pre-trade-war volumes) . Any imports above that quota would still pay tariffs, but effectively the punitive tariffs on EU metals were mostly lifted. In return, the EU lifted its retaliatory tariffs on U.S. goods. This included canceling a planned doubling of the EU’s retaliation that was scheduled – the EU had threatened to raise the whiskey and bike tariff to 50% by mid-2021 if no deal, but that was called off . Both sides also agreed to drop their WTO litigation against each other on this matter. Importantly, this 2021 arrangement was termed a “truce” or interim deal. The U.S. and EU agreed to negotiate a Global Arrangement on Sustainable Steel and Aluminum (GASSA) by 2024 – essentially a future pact to address worldwide steel excess capacity, carbon emissions from steel/aluminum, and to possibly coordinate on trade measures against dirty steel (aimed largely at China). This future-oriented negotiation was a way to mutually justify ending the tariffs without admitting wrongdoing: they cast it as coming together to solve a bigger problem. In parallel, the U.S. and EU in 2021 also resolved other tariff fights: they reached a ceasefire in the Airbus-Boeing subsidies dispute, suspending all related tariffs for five years while working on a long-term solution. They also averted a showdown over digital services taxes (where the U.S. had threatened tariffs on European countries but then paused them as a global tax deal was hashed out). These moves marked a broader U.S.-EU rapprochement on trade by 2021, effectively ending the 2018 tariff war chapter (at least temporarily) and allowing both economies to recover from the trade disruptions just in time to focus on recovery from the pandemic shock.

Emergence of the 2025 Dispute & Ongoing Negotiations

The “truce” held through 2022–2023, but as the 2024 deadline for the global steel/aluminum arrangement approached, negotiations apparently stalled. The issues – how to enforce climate-based steel rules, what to do about Chinese overcapacity, and whether to fully lift the Section 232 tariffs – proved complex. By March 2025, the U.S. (under a new administration less inclined to compromise) decided to let the truce lapse and reimpose tariffs, sparking the new trade war. Efforts to resolve the 2025 dispute are now unfolding. On the immediate front, the EU has been pressing for diplomatic talks to reinstate the exemptions or quotas that were in place. European leaders have called for the U.S. to come back to the negotiating table rather than escalate further. There is discussion of a possible interim solution: for instance, the idea of a “climate club” for steel where the U.S. and EU would impose joint tariffs on high-carbon steel from third countries and drop tariffs between themselves. Such creative solutions were part of the prior talks and could be revived. The U.S., for its part, signaled that if the EU drops its counter-tariffs and engages on a broader trade deal (potentially including areas like agriculture or tech), it might reconsider the metals tariffs. However, the EU has maintained it won’t negotiate “with a gun to its head” (a phrase used by EU officials historically , meaning they want the tariffs lifted as a precondition to broader talks). In terms of policy adjustments, both sides are leveraging other tools. The EU is moving ahead with its Carbon Border Adjustment Mechanism (CBAM), which by 2026 will start levying fees on imports based on carbon content (including steel). This could eventually make some U.S. steel subject to fees (if it’s high-carbon) or conversely, support an argument that the U.S. and EU should align climate and trade policy (the U.S. tariffs could be replaced by climate-based measures). The U.S. is also considering using Section 232 tariffs as bargaining chips in other areas – for example, hinting that if the EU cooperates on certain strategic issues, maybe some tariff relief could be granted. Meanwhile, businesses and consumers are lobbying hard, which influences policymakers. Their pressure can lead to domestic policy adjustments, like aid packages or exclusions: for instance, the U.S. Commerce Department might expand the tariff-exclusion process to ease pain for certain importers, or the EU might set up compensation funds for firms hurt by U.S. tariffs (similar to how the U.S. government compensated farmers hurt by the China trade war in 2018–19). Another avenue for resolution is via third-party mediation or coalitions. Sometimes trade disputes are eased by involving mutual allies or through forums like the OECD. In 2025, it’s conceivable that the UK or other G7 members could quietly mediate between the U.S. and EU since they all have an interest in economic stability. Additionally, since both the U.S. and EU are interested in focusing on China’s trade practices, there’s an incentive to patch up their own squabble to present a united front in reforming global trade rules. This strategic imperative might drive negotiations forward. As of this analysis (early 2025), no final resolution has been achieved, but both sides have expressed a willingness to engage in talks. There is precedent that suggests a path to resolution: a combination of mutual concessions, face-saving agreements, and refocusing on common goals. For example, one could envision a deal where the U.S. again lifts tariffs on a certain quota of EU metals (or even eliminates them completely) and the EU reciprocates by removing all retaliation; both then commit to a timeline to conclude the Steel/Aluminum Arrangement and possibly coordinate on carbon tariffs. Concurrently, they might sign a memorandum on working together in the WTO to discipline non-market excess capacity. Such outcomes would allow each side to claim victory (protecting industries or values) while restoring normal trade flows. Finally, it’s worth noting political cycles: U.S. elections and EU political changes can influence trade policy. In 2018, the tariffs were in part driven by Trump’s domestic agenda; in 2025, politics again (a more protectionist U.S. stance) played a role. If those politics shift (for instance, if U.S. businesses convince the administration that the tariffs are hurting more than helping), policy can shift quickly. Both the U.S. and EU have shown they can be pragmatic – as seen in 2021 when they swiftly stood down the fight – so ongoing negotiations carry a good chance of eventually resolving the dispute, even if it takes many rounds of talks and interim deals.

In terms of long-term policy adjustments, this era of tariff wars has prompted both sides to reconsider trade policy doctrines. The U.S. is re-evaluating the overuse of national security tariffs, and Congress has discussed reining in executive trade powers (though no significant legislation passed as of 2025). The EU, for its part, has developed new trade defense tools (like its anti-coercion instrument) to respond to economic aggression, and is more willing to retaliate firmly as a deterrent. Both are also looking at diversifying supply chains for critical materials (e.g., less reliance on imports for steel or critical minerals) as a way to reduce vulnerability. These policy shifts are indirect outcomes of the 2018 and 2025 clashes, aimed at reducing the likelihood that such disruptive tariff wars occur in the future or at least mitigating their impact if they do.

Conclusion

The U.S.-EU tariff wars of 2018 and 2025 serve as potent reminders of how quickly trade tensions can escalate and how damaging they can be – even between longstanding allies. These disputes pulled a range of industries into the fray, from primary metals to iconic consumer goods, underlining the broad economic significance of transatlantic trade. The tariff volleys caused higher costs for businesses and consumers, disrupted supply chains, and sparked uncertainty that weighed on investment and growth . Both sides experienced economic pain: companies faced lost export markets or pricier inputs, workers faced threats to jobs, and consumers paid more for certain products. In macro terms, the skirmishes dented manufacturing output and trade volumes, and they failed to achieve the political goals of reversing trade imbalances (in fact, the U.S. trade deficit with the EU hit new highs despite the tariffs).

Yet, these trade wars also demonstrated the capacity – and necessity – for negotiation and compromise. The cycle in each case followed a similar pattern: tariffs were imposed unilaterally, the other side retaliated, tensions rose, and then eventually negotiations intervened to calm the waters. In 2018, diplomacy led to an interim truce and later a mutual lifting of tariffs under a new U.S. administration . In 2025, the jury is still out, but there is clear pressure from industries and allied nations to find a resolution. The experiences have pushed the U.S. and EU to explore new frameworks (like the proposed sustainable steel arrangement) and to modernize trade relations rather than simply slug it out with tariffs. A key takeaway is that trade wars produce no real winners – only degrees of loss. While one country might momentarily gain leverage, the overall economic impact tends to be negative for all involved, creating incentives to return to the table. Indeed, the U.S. and EU managed to resolve related disputes (e.g. the aircraft subsidies conflict) when they recognized the mutual harm of continued tariffs and the greater benefit of cooperation.

Moving forward, both the U.S. and EU appear more keen to address root problems (such as global overcapacity in steel or unfair practices by third countries) together, rather than fight each other. The tariff wars have spurred discussions about reforming international trade rules to better handle security and fairness concerns – hopefully reducing the likelihood of such confrontations in the future. In the end, the transatlantic tariff wars underscore an old lesson in trade policy: while protectionist tariffs are easy to trigger, their cascading effects are hard to contain, and ultimately negotiated solutions and rule-based agreements are essential to restore stability and foster mutual economic prosperity. Both 2018 and 2025 showed that despite periods of intense conflict, the U.S. and EU have strong incentives – economic and geopolitical – to patch up their differences and reinforce a cooperative trading relationship, rather than let tariff wars drag on indefinitely. The hope is that cooler heads and sustained negotiations will once again prevail, bringing an end to the 2025 hostilities and reinforcing the value of partnership over protectionism in one of the world’s most important economic relationships.

Sources

Bruegel – “What to make of the EU-US deal on steel and aluminium?” (Nov 2021) – Background on 2018 steel/aluminum tariffs ($7.5 billion EU exports affected) and EU retaliation measures (€6.4 billion total, €2.8 billion in 2018 with list of products like motorcycles, bourbon, etc.).

Reuters – Coverage of 2025 Tariff Escalation (March 12–13, 2025) – Details on U.S. raising steel/aluminum duty to 25% on all imports and extending to downstream products; Trump’s quotes on matching EU retaliation; EU announcing tariffs on €26 billion of U.S. goods (reimposing bourbon tariff, etc.); impact on American whiskey exports (20% drop from 2018 tariffs).

Trade Partnership Worldwide – Policy Briefs (2018) – Estimated U.S. job impacts of 2018 tariffs: ~146k net jobs lost from metals tariffs alone, nearly 470k lost if including full retaliation (over 18 jobs lost per one gained in steel/aluminum).

Econofact (Russ & Cox, 2020) – “Steel Tariffs and U.S. Jobs Revisited” – Empirical estimate that by mid-2019, steel/aluminum tariffs contributed to 0.6% fewer manufacturing jobs (~75k jobs lost) in the U.S., as higher input costs hit steel-using industries; confirms significant job losses downstream far exceeding jobs gained in steel production. Also notes widespread requests for tariff exclusions by U.S. firms .

The Independent (UK) – “Trump’s new tariffs and EU retaliation” (Mar 12, 2025) – Describes U.S. 25% steel/aluminum tariffs hitting UK/EU, EU counter-tariffs worth €26 billion, and political debate in UK about whether to align with EU retaliation.

Politico – “Trump threatens tariff on European cars” (June 22, 2018) – President Trump’s tweeted threat of a 20% tariff on all imported European automobiles if the EU retaliated against U.S. metal tariffs; context of auto trade frictions.

Reuters – “Harley-Davidson to move production to avoid EU tariffs” (June 25, 2018) – Details how EU’s 25% tariff on U.S. motorcycles (June 2018) added ~$2,200 cost per bike, costing Harley ~$100 million annually, leading the company to shift production for EU-bound bikes out of the U.S. to mitigate the tariff.

Reuters – “Brussels targets U.S. goods, industry fears retaliation” (Mar 12, 2025) – Notes European Commission’s plan to impose tariffs on €26 billion of U.S. goods, including reintroduced tariffs on bourbon and new ones on other spirits, cosmetics, etc.; European industry associations (spiritsEurope, FEBEA) expressing concern that this puts their sectors at risk of U.S. counter-retaliation (since EU exports much more in those sectors).

Atlantic Council – “Was the Trump-Juncker Meeting Really a Success?” (July 26, 2018) – Recaps the outcomes of the July 2018 White House meeting: EU’s commitments to buy U.S. soybeans/LNG and work toward zero industrial tariffs, in return for the U.S. backing off auto tariffs; the joint statement to start negotiating and resolve the steel/aluminum dispute.

CNBC / CBS News – Quotes from Ford CEO (Sept 2018) – Ford CEO Jim Hackett’s statement that metal tariffs imposed by Trump’s administration were costing Ford about $1 billion in profit, highlighting the impact on production costs for automakers.

OECD/IMF reports (cited via Econofact) – Indicate that the broader trade war (U.S.-China and U.S.-EU) increased uncertainty, which depressed investment and global growth expectations in 2019; global steel demand and prices were weakened by trade tensions, illustrating spillover effects on commodity markets.

Further Reading: US–EU Trade (2000–2025): A Comprehensive Report

Shruti Kant