Europe and the never-ending tariff threat | DW News

0:00 Imagine for a moment you're the CFO,

0:02 or chief financial officer, of a European car company,

0:05 [music] and it's quarterly earnings day.

0:06 So, you get up there and you tell the world this is where we were last quarter,

0:09 and this is where we think we're going.

0:10 [music] And frankly, it's been another difficult 3 months.

0:13 US tariffs haven't helped, but hey, a political deal is in [music] the works.

0:17 Maybe that'll bring more certainty.

0:18 And then just a few days later, this happens.

0:21 Tariffs to go up [music] 10 percentage points.

0:23 Maybe.

0:24 Maybe not.

0:25 And that's the reality for Europe's exporters right now,

0:27 and not just auto companies, machinery, pharmaceuticals, you name it.

0:31 All grappling with the possibility

0:32 that the tariff rates [music] they're planning

0:34 around today will actually be out of date in a short time.

0:37 But how did we even get here?

0:38 Where is this all going?

0:40 And will there ever be certainty again on tariffs?

0:42 Well, it all started even before Trump's famous big board tariffs.

0:45 The first real volley against the EU was [music] back in February 2025.

0:49 That's when Trump announced global tariffs on steel and aluminum,

0:51 which would hit EU producers [music] hard.

0:53 And he later doubled it to 50%.

0:56 Then it was in March 2025 that Trump announced tariffs on carmakers globally.

0:59 25%.

1:01 Another big hit to a major [music] exporting industry in Europe.

1:04 Then came those big board announcements in early April, Liberation Day.

1:06 [music] Here's where it gets a little more complicated.

1:08 These were known as reciprocal tariffs.

1:10 They set a 10% floor,

1:11 and then added to it based on the trade deficit between that nation and the US.

1:16 Now, for the EU, the US calculated [music] a tariff of 20% on most goods.

1:20 Now, that's a 10% base and 10% for the deficit calculation.

1:23 Now, that didn't affect the auto and steel tariffs,

1:25 those still remained in place.

1:27 [music] Now, in the next few months, there was a bit of back and forth.

1:29 Trump paused the reciprocal tariff on most countries,

1:31 leaving the EU with the baseline 10% [music] tariffs before negotiations began.

1:35 Then in July, in the middle of negotiations with the EU,

1:38 he threatened 30% [music] tariffs on the block.

1:40 Now, every step of the way the EU had threatened counter

1:42 tariffs on things like motorcycles and boats and [music] specific textiles,

1:46 even American soybeans, if things escalated.

1:48 But it suspended them to continue [music] negotiations.

1:51 And the two sides did reach a deal in late July.

1:53 That's the Turnberry Agreement,

1:55 named after the Scottish golf course where the deal was sealed,

1:58 it basically allows the [music] US to charge a 15%

2:00 tariff on most European goods and it loops in cars, but not steel and aluminum.

2:05 The EU in return would lower industrial tariffs

2:07 and some tariffs on US agricultural products to zero.

2:10 Now, it was not clearly a deal that was balanced.

2:14 That's Ignacio Garcia Bercero.

2:16 He's been following the trade dispute with Brussels based think tank Bruegel.

2:20 It was not even I would say a deal that would

2:21 have been compatible with international obligations with the rules of the WTO.

2:27 And that's what's interesting here.

2:28 Turnberry was a complete reconfiguration of the two sides tariff relationship.

2:33 [music] And both had enjoyed most favored nation status from the other,

2:36 which was WTO recognized, that's [music] the World Trade Organization,

2:40 and generally came with lower rates compared to the rest of the world,

2:42 like 2 and 1/2 percent on car imports into the US.

2:45 The new deal, 15%, gave the US [music]

2:47 an incredible advantage compared to other trading nations.

2:50 It's pretty remarkable and not really where the EU wanted to be.

2:54 But the EU didn't put the 0% in place right away.

2:57 For one, the approval process in the EU is lengthy.

3:00 Lucia Schulten is our Brussels correspondent.

3:02 I spoke to her in Paris where she was covering a G7 meeting.

3:05 This is in a way just the way law making,

3:09 decision making is made in the European Union.

3:12 It just takes quite a lot of time.

3:14 But the new year also brought new challenges.

3:16 Trump threatened [music] new tariffs over Greenland, nothing came of it,

3:19 but the ordeal did leave a lot of anger on the side of the EU.

3:22 [music] Then in February,

3:23 the US Supreme Court overturned Trump's liberation day tariffs.

3:27 Now, the Trump administration quickly tacked back [music] by replacing

3:30 it with a 10% tariff under a different statute,

3:32 the best they could do on short notice.

3:35 [music] Unfortunately, that tariff stacks on top of existing WTO tariffs,

3:38 meaning it's often more than 10%.

3:40 [music] For the EU, the US left the auto tariffs,

3:42 which are covered by different statute, one dealing with national security,

3:45 at 15% just like with the Turnberry [music] agreement.

3:48 And it argued the EU should still respect Turnberry,

3:51 but the European Parliament, which still had to approve the deal, was skeptical.

3:54 Ultimately, though, it does approve the deal,

3:57 but with conditions and preconditions.

3:59 One of them, lowering steel and aluminum tariffs from 50%.

4:03 So, now it goes before European members for final approval,

4:05 and that's essentially where we were last week.

4:08 So, let's go back to the auto industry.

4:10 In just over a year, [music]

4:11 you've gone from a starting point of most favored nation tariffs

4:14 to Trump's original auto tariffs to the rate under the Turnberry deal.

4:18 So, there is one red thread hanging over the last year.

4:21 Thibault L'Orty works for the American Chamber of Commerce in Europe, or AmCham.

4:25 Talking to a lot of our member companies, it's really, you know,

4:28 the the energy that has been put into the monitoring,

4:33 the forecasting, and ultimately the managing of the situation.

4:36 You know, you talk to companies that have put teams

4:38 together to be able to to some extent be able

4:40 to follow what's what's going on and see what does

4:43 it mean from a company perspective and how do we adapt.

4:45 But, then stability carries a high price.

4:47 A blanket 15% tariff isn't great to begin with.

4:50 Europe is currently selling fewer cars into the US.

4:52 The value of European cars imported into the country

4:55 fell in 2025 by 21% from 2024.

4:59 Mercedes says tariffs cost them 1.1 billion euros in 2025.

5:03 VW says it's paying 4 billion euros annually.

5:06 Its CFO, meanwhile, has hinted at even more cost-cutting for the company.

5:09 On the other hand, a deal brings certainty,

5:11 and that's definitely what's missing right now.

5:13 As we saw last week with the threat [music] of a 25% tariff on vehicles.

5:17 Now, for its part, the EU has decided

5:18 it needs to speed up the Turnberry agreement.

5:21 Sefcovic, um, the trade commissioner, again, met yesterday, uh,

5:24 with the trade representatives of the US, and he said that they want to, like,

5:29 see the main parts of this agreement be put into practice,

5:33 uh, by its first anniversary, which will be in July.

5:37 So, I think there's a real sense of urgency in the European Union that this has,

5:40 you know, to be pushed over the table soon.

5:43 But, the question remains, will that help?

5:45 Would signing a deal really preclude new tariff threats?

5:47 I think the only thing that is predictable is total unpredictability.

5:51 I think it is very clear that we are actually facing a situation in which at any

5:56 point in time the president of the United

5:57 States may decide to put forward a tariff threat.

6:02 And that leaves our CFO in a bind.

6:05 How does a company prepare for the twists and turns of these turbulent times?

6:08 And what costs are they going to carry in the end?

6:10 And that's something we'll have to find out later.

6:12 For now, we're still in the middle of this thing on Wednesday,

6:16 May 6th at almost 4:00 p.m.

6:19 And who knows what'll happen tomorrow.