Tariffs, Trump, and the EU: Lessons from the Past Year for What Comes Next
By Ferdi De Ville
Prof. Dr. Ferdi De Ville is a professor with the Ghent Institute for International and European Studies (GIES).
This essay reviews the first year of President Trump’s second term through the lens of tariffs. It assesses whether tariffs have delivered on four promises: shrinking the US trade deficit, reshoring industrial jobs, raising fiscal revenues and extracting foreign concessions. It examines how the European Union has responded across three tracks – deal, diversify and deter – and what worked. The review concludes that the past year brought lots of tariff spectacle, but few structural changes, for now. The EU learned that trade appeasement invites further escalation, while credible deterrence makes Trump backtrack. In the years ahead, Trump will undoubtedly test the EU’s resolve and unity to stand up when needed.
A year of tariff spectacle
The first year of Donald Trump’s second term could hardly have closed more fittingly than with the American President threatening European countries with tariffs to convince them to hand over Greenland to the United States. For a year the self-declared “Tariff Man” wielded his favourite instrument to pursue a long list of goals. How successful has his tariff policy been? How did the EU respond? And what should we learn for the coming years?
Tariffs announcements, delays, hikes and cuts became a weekly ritual. According to a trade war tracker (Bown, 2026), the Trump Administration launched more than 120 trade actions over the past year, lifting the average applied US tariff from about 2.4% a year earlier to 16.9% by early 2026, the highest since 1932 (Yale Budget Lab, 2026).
Trump’s tariff hyperactivity should not surprise. For decades he argued that the world takes advantage of the US on trade. Tariffs are his preferred weapon to right that wrong and to restore American supremacy. He sees them as a Swiss army knife able to repair a host of American problems.
Have the tariffs delivered?
On reducing the American trade deficit, results are mixed. Monthly data for October 2025 show the trade deficit for goods and services narrowing to its lowest level since 2009. Yet from January to October the cumulative deficit rose by nearly 8% compared to a year earlier, mainly because American firms front-loaded imports in early 2025 in anticipation of tariff hikes (Swanson, 2026).
Tariffs were billed as a magnet for factories and well-paid industrial jobs. The White House highlights a headline figure of $9.6 trillion in investments supposedly attracted by Trump’s trade policies. However, these often reflect announcements rather than final project decisions, or investments that were likely to have happened anyway. On the ground, US manufacturing employment fell by about 65,000 in 2025 (Federal Reserve Bank of St. Louis, 2026).
Higher tariffs translated into higher revenues in the form of customs receipts. In 2025, US customs collected an estimated $287 billion in duties, nearly triple the year before (Azzimonti et al., 2026). This has reduced the federal budget deficit marginally, which still stood at $1.78 trillion last year.
Tariffs were also used to press other countries for political concessions. They put pressure on China and Canada to curb fentanyl trafficking to the US while pushing Mexico to further restrict irregular migration. Tariffs and threats were deployed to dissuade governments, including in the EU, from initiating digital and sustainability rules seen as harmful to US corporate interests, and to penalise energy ties with Russia or commerce with Iran. It remains to be seen how much policy has actually shifted beyond pledges to placate Washington.
More show than shifts
After a year, the scoreboard is modest. Improvements in the trade and budget deficits are marginal; there is no industrial renaissance; and while threats extracted signals of cooperation or obedience from partners, durability is uncertain.
Tariffs did not deliver nirvana to the US. But neither did apocalypse happen. US real growth in 2025 remained broadly robust around 2% (International Monetary Fund, 2025), while inflation averaged roughly 2.7% (US Bureau of Labor Statistics, 2026). Both outcomes proved less dramatic than many expected.
The wider world economy also proved resilient. The IMF estimates global growth of about 3.2% in 2025, close to its long-run average. Europe’s economic outlook was also revised up repeatedly throughout the year, with growth expected around 1.4% (European Central Bank 2025).
Trump’s tariff theatrics are drawing a great deal of attention. But we should also put its impact into perspective. The US accounts for less than 15% of world trade. The global economy proved more adaptable than many assumed, at least for now.
Unsurprisingly, both Trump supporters and opponents find confirmation of their views in these mixed results. Both camps claim that the true benefits or costs will arrive with a lag, supposedly in 2026. Trump himself is likely to feel vindicated and press ahead.
Europe’s response: Deal, diversify, deter
Like others, the EU faced three strategic options to respond to Trump’s tariffs: cut a deal, diversify trade relations and deter through countermeasures.
As one of the world’s largest economic blocs, the Union has leverage. At the same time, it also relies heavily on the United States in the areas of defence, digital technologies and energy. Fears that Washington might pull support for Ukraine or further undermine NATO shaped Europe’s calculations.
Efforts to reach an agreement with the US had priority. This was accompanied with a push to diversify trade relations. The EU has been reluctant to impose retaliatory measures.
Deal
Like fourteen other countries did last year, the EU signed a putative trade agreement with the US in August. The so-called “Framework on an Agreement on Reciprocal, Fair and Balanced Trade” was anything but reciprocal, fair or balanced. It scrapped EU tariffs on US goods and eased farm imports while US tariffs on most EU exports rose to at least 15%.
Europe also pledged to purchase $750 billion in LNG from the US by end-2028, channel $600 billion in additional investment across the Atlantic, and expand defence procurement from American suppliers (European Commission 2025).
The hope was that this asymmetric, even humiliating, deal would restore calm in the transatlantic relationship so both sides could focus on cooperation to end the war in Ukraine on just terms. That proved utterly naïve. For Trump, an asymmetric deal is not an endpoint, but an encouragement to escalate pressure for further concessions. Predictability, as he sees it, is a sign of weakness.
Diversify
Tariffs spurred affected countries to diversify. Better access to other markets cushions lost US sales today, while reducing future dependencies and exposure to blackmail.
The EU accelerated long-stalled negotiations. It closed a deal with Indonesia in September 2025. The agreement with Mercosur, which has been a quarter of a century in the making, advanced through the Council in January, although the European Parliament requested a Court of Justice opinion before its vote.
Talks with India, revived after a long pause, moved into fast lane and culminated in a political agreement in late January. Negotiations with Thailand, Australia and the Philippines also gained momentum.
At the same time, the EU had to deal with trade diversion, especially from China. Despite the trade war with the US, China ran a record $1.2 trillion trade surplus. It managed to offset a 20% plunge in sales to the US market by redirecting exports to other regions. Chinese shipments to the EU grew by about 8.4% (Financial Times, 2026).
To protect European industry the EU ramped up trade defence measures in 2025. New anti-dumping cases on Chinese imports were launched. The European Commission proposed a 50% tariff on steel imports once a reduced quota is exceeded. And it used the International Procurement Instrument for the first time to bar Chinese firms from medical device tenders.
With the entry into force of the Net Zero Industry Act, member states are required to exclude Chinese suppliers from public tenders or auctions for strategic green technologies. The forthcoming Industrial Accelerator Act would embed “European preferences” in procurement or support programmes for a broader set of strategic industries.
Deter
The EU has been cautious in wielding retaliation to dissuade tariff hikes on EU exports. In response to US tariffs on steel and aluminium and the “Liberation Day” measures, the Union prepared two product lists for possible counteraction, then repeatedly paused their activation to pursue a negotiated solution.
In the summer, as part of the transatlantic trade deal, Brussels suspended countermeasures worth $93 billion of US exports, ready to snap back if the US reneged. That did not stop fresh American tariff threats in early 2026 to coerce support for Trump’s “Peace Council” or for US annexation of Greenland.
Threats to use tariffs in a bid to annex European territory crossed a red line. In the hectic “Davos week”, many European policymakers signalled readiness to respond forcefully this time.
This implied not only activating retaliatory tariffs, but also considering limits on American firms’ investment, participation in public procurement or protection of intellectual property in the EU through the Anti-Coercion Instrument. This firmer stance, voiced without immediate dissonance, appears to have helped dissuade Trump from using tariffs (or military means) to force the issue over Greenland.
China had already shown that confronting Trump commands more respect from him and can make him back down. Europe lacks China’s dominance of critical raw materials as a trade war lever, but it holds other cards: unique advanced chip-making equipment, irreplaceable medicines, and large holdings of US Treasuries (Gehrke 2025).
Lessons and the road ahead
Europe learned hard truths in 2025. Appeasing Trump and striking an asymmetric deal did not bring stability but invited ever more extreme demands. Credible deterrence has a better chance of success.
The Greenland episode crystallised the need for genuine strategic autonomy from the US and the value of resolve. Belgium’s prime minister, Bart De Wever, said in Davos that Europe must dare to say to Trump that it is prepared to “go all the way” in a trade war.
The EU should now “game through” what “going all the way” entails. How to deploy the Anti-Coercion Instrument quickly and forcefully, and how to respond to further escalation, economic or otherwise.
References
Azzimonti, M., Titcomb, J. & O’Trakoun, J. (2026) How Much Revenue Has Been Raised by Tariffs so Far? Macro Minute, January 13, Federal Reserve Bank of Richmond.
Bown, C. (2026) Trump’s Trade War Timeline 2.0: An Up-To-Date Guide. Peterson Institute for International Economics, piie.com.
European Central Bank (2025) Economic Bulletin, Issue 8/2025.
European Commission (2025) Joint Statement on a United States-European Union Framework on an Agreement on Reciprocal, Fair and Balanced Trade. Brussels, 21 August.
Federal Reserve Bank of St. Louis (2026) Manufacturing Employment (MANEMP). Database, fred.stlouisfed.org.
Financial Times (2026) China Blames US for Trade Imbalance as Surplus Hits Record $1.2tn. FT.com, 14 January.
Gehrke, T. (2025) Brussels Hold’em: European Cards Against Trumpian Coercion. Policy Brief, European Council on Foreign Relations.
International Monetary Fund (2026) Real GDP Growth. Database, imf.org.
International Monetary Fund (2025) World Economic Outlook: Global Economy in Flux, Prospect Remain Dim. Washington (DC): International Monetary Fund.
Swanson, A. (2026) ‘US Trade Deficit Fell to Lowest Level Since 2009 as Tariffs Reshape Trade’, The New York Times, January 8.
The White House (2026) Major Investment Announcements. Whitehouse.gov.
U.S. Bureau of Labor Statistics (2026) Consumer Price Index – December 2025. News Release, January 13, bls.gov.
Yale Budget Lab (2026) State of Tariffs: January 19, 2026. Budgetlab.yale.edu.