Tensions across the Atlantic reached new heights Tuesday as Swedish Finance Minister Elisabeth Svantesson delivered a stark warning: European businesses should brace for U.S. tariffs of at least 10% under a potential second Trump administration. This sobering assessment marks a significant escalation in trade anxiety between longtime allies whose economic relationship supports millions of jobs on both continents.
“European companies need to prepare for U.S. tariffs of at least 10% if Donald Trump wins the November election,” Svantesson told reporters following an economic policy meeting in Stockholm. “That’s the lowest we can expect.” Her candid assessment reflects growing concerns throughout European capitals about the Republican candidate’s repeated threats to impose sweeping import duties.
Trump’s campaign promises have specifically targeted the European Union with potential tariffs ranging from 10% to as high as 20% on all imports. These statements have sent ripples through financial markets and corporate boardrooms across Europe, where exports to America represent a critical economic lifeline for many industries.
According to data from the Office of the U.S. Trade Representative, the EU-U.S. trade relationship is the largest bilateral trade relationship in the world, with goods and services trade totaling approximately $1.3 trillion annually. European carmakers like Volkswagen, BMW, and Mercedes-Benz would be particularly vulnerable to new tariffs, as would machinery manufacturers and pharmaceutical companies.
“These aren’t empty threats,” said Marcel Fratzscher, president of the German Institute for Economic Research, in a recent interview with Bloomberg. “The economic impact would be substantial, possibly triggering a recession in export-dependent European economies if implemented at the higher end of the range.”
The Swedish finance minister’s warning comes as European officials have been quietly developing contingency plans for a potential trade confrontation. The European Commission has reportedly been updating its retaliatory tariff lists, originally created during Trump’s first term, though officials have been reluctant to discuss these preparations publicly.
Economic analysts at Barclays estimate that a 10% blanket tariff on European exports to the U.S. could reduce EU GDP by approximately 0.3% within the first year of implementation. The impact would be particularly acute in Germany, where the economy already faces challenges from industrial slowdowns and energy transition costs.
“This is more than just campaign rhetoric,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics. “The Inflation Reduction Act and other recent U.S. policies suggest a broader shift toward economic nationalism that transcends administrations, though Trump would likely accelerate this trend dramatically.”
Adding to European concerns, Svantesson noted that even if tariffs begin at 10%, they could escalate as part of negotiating tactics. This creates significant planning challenges for businesses that operate on multi-year investment cycles and global supply chains.
Financial markets have already begun pricing in this geopolitical risk. The euro has experienced periodic weakness against the dollar following Trump’s strong showing in primary elections and polling, with currency traders increasingly factoring in potential trade disruptions.
For European policymakers, the challenge extends beyond preparing retaliatory measures. The European Central Bank may need to consider how potential tariffs could affect inflation projections and interest rate decisions, particularly if import costs rise and economic growth slows simultaneously.
Some European industry groups have begun lobbying for preemptive measures. BusinessEurope, the continent’s largest business federation, has called for accelerated trade diversification efforts and government support programs to help companies adapt to potential market access restrictions.
“The warning from Sweden’s finance minister reflects a growing recognition that Europe needs to prepare for significant changes in its trading relationship with the United States,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels. “This isn’t just about Trump – it’s about a fundamental shift in how America views trade relationships.”
Historical context matters here. During Trump’s first term, the U.S. imposed tariffs on European steel and aluminum, citing national security concerns – a move that prompted retaliatory EU tariffs on American products ranging from motorcycles to bourbon whiskey. Those disputes were only partially resolved under the Biden administration.
Svantesson’s comments suggest European officials see the potential for a much broader confrontation if Trump returns to office, one that could fundamentally reshape transatlantic economic relations at a time when both regions face economic headwinds and security challenges from Russia and China.
As Europe navigates this uncertain terrain, businesses across the continent face difficult decisions about investment plans, market strategies, and supply chain resilience. Svantesson’s warning serves as a wake-up call that regardless of November’s outcome, the era of frictionless transatlantic trade may be giving way to a more complicated, and potentially costly, new reality.
