Trade war with the US harms almost all regions in Europe

The European Union is struggling to reach a trade agreement with the US. Every day brings new alarming headlines about trade between the two economic areas. How will this affect prosperity in regions as diverse as western Ireland, Cyprus, northern Sweden and Sicily? Researchers commissioned by the Foundation for Family Businesses have looked into this question.

Munich, 6 June 2025. A comprehensive trade agreement with the US would be beneficial for almost all regions of the EU. As this interactive graphic shows, tariffs of 25 or even 50 percent on European goods, as proposed by US President Donald Trump on 2 April and 23 May 2025, would lead to a decline in imports, exports and gross domestic product (GDP). However, even before these tariffs come into effect, the ongoing uncertainty about future tariff policy is already harming Europe’s economy signifi-cantly.

These scenario analyses are the work of a team led by trade economist Professor Gabriel Felbermayr, Director of the Wifo research institute in Vienna, in collaboration with the Kiel Institute for the World Economy. They illustrate that the effects of trade policy measures vary from region to region. Regions in Ireland and the small state of Luxembourg stand out as notable outliers. Rural regions show different results to industrial centres. Winners and losers are unevenly distributed.

It is therefore doubtful whether a quick deal, such as the one recently concluded between the US and the UK, would be beneficial for the EU. The researchers note that, although this deal brought tariff advantages in certain sectors, there was no in-depth agreement on regulations. For the EU, they recommend a more comprehensive agreement that dismantles trade barriers for goods and services. However, they concede that even a trade agreement that is significantly less ambitious than the previ-ously envisaged TTIP agreement, which ultimately fell through, might still be worth-while.

A new agreement providing legal certainty and removing existing barriers would be very important, particularly for family businesses in the EU. Family businesses often do not have production sites in the US and therefore have difficulty avoiding customs duties. At the same time, they are often dependent on the US as a key sales market. Redirecting exports to alternative markets is difficult for them because they tend to offer highly specialised products whose demand depends on the industrial structure of the importer. – But the dependence is mutual.