The impact of the new wave of US tariffs on global businesses

What you need to know

• The latest US tariffs place an unprecedented strain on the global trade system, carrying the potential for long-term disruption and structural shifts in international trade.
• Under the new "reciprocal tariff scheme," key US trading partners were initially set to face record-high base tariffs on imports. However, these rates have now been temporarily adjusted to a uniform base rate of 10% for all countries for a 90-day period, with the exception of China, whose tariff rate has been increased to 145%.
• While US trading partners have demonstrated a willingness to negotiate, they are still expected to implement additional countermeasures. This increases the risk of unintended consequences, including supply chain disruptions and rising operational costs for their own industries.
• While the impact of the measures will be felt across sectors, the severity will vary, depending on each industry's level of export exposure and reliance on the US market.
• The new international trade landscape is set to heighten uncertainty around the viability of cross-border trade and related investment decisions.
• Businesses will need to begin with a thorough risk exposure assessment by reviewing sourcing and production strategies, aligning customs and tax planning, and monitoring potential retaliatory measures linked to shifting trade policies.

The new Trump administration’s shift toward protectionist trade policy (underscored by latest wave of tariff measures announced on "Liberation Day") marks a disruptive moment for global markets. Given the US’s role as the world’s largest import market, these measures will have significant impact on internationally operating businesses, particularly those with complex, cross-border supply chains. The broad scope of the new tariffs suggests sector-wide effects, increasing compliance burdens and operational risks. Announced countermeasures and policy responses from key US trading partners, including the EU could not only intensify this effect but generally reshape the regulatory and trade landscape for businesses.

This briefing is part of our new briefing series examining the evolving US trade measures and their implications for EU businesses. This update provides a focused assessment of the new tariffs' impact on EU business operations from an EU and international trade law perspective. We will provide an overview of the existing and threatened US measures and countermeasures by key US trading partners and assess their impact on globally operating businesses. Our other updates will address the US measures from a private law perspective examining the consequences for existing and future contractual relationships. 

Overview of US measures imposed so far

Country-specific measures 

On 1 February 2025, the US President issued an Executive Order declaring a national emergency under the International Emergency Economic Powers Act (IEEPA), authorising the imposition of an additional 25% tariff on imports from Canada and Mexico. Although the entry into force of the measures was initially suspended to allow for negotiations, the tariffs were scheduled to take effect on 4 March 2025. However, on 6 March 2025, the US administration announced that goods originating from Mexico and covered under the United States-Mexico-Canada Agreement (USMCA) would be exempt from the tariff measure.

Also on 1 February 2025, pursuant to the IEEPA, citing a national emergency related to drug smuggling, the US imposed an additional 10% tariff on imports from China, including Hong Kong, and eliminated the application of de minimis thresholds. These measures entered into force on 4 February 2025. Subsequently, on 4 March 2025, the tariff rate was increased to 20%.

Good-specific measures

On 10 February 2025, President Trump imposed a 25% tariff on all steel and aluminium imports, which came into effect on 12 March 2025. In his executive order, he invoked Section 232 of the Trade Expansion Act, relying on his 2018 actions, and revoking previously-negotiated arrangements and exclusions as well as also expanding and introducing new measures. The expanded scope now also covers derivative articles of steel and of aluminium.

On 26 March 2025, a 25% tariff on all imports of automobiles and certain automobile parts under Section 232 was imposed.

Across-the-board tariff regime

On 2 April 2025, marking the "Liberation Day", President Trump announced his "reciprocal tariff regime". The new tariff scheme, also based on the IEEPA, includes a universal 10% tariff on all countries, which came into effect on 5 April 2025, and levies that Trump has called “reciprocal”. They include a 34% tariff on Chinese goods and a 20% tariff on EU imports, that apply from 9 April 2025. Trump had already introduced the concept of “reciprocal tariffs” during his presidential campaign. However, the formula for calculating the tariff rate is fundamentally different than anticipated by most observers. Rather than mirroring the base tariff on a specific product that a trading partner taxed on US imports of that product, the new tariff formula calculates a "reciprocal tariff" by taking the 2024 US goods trade deficit with a country, dividing it by the value of that country’s exports to the United States, and then halving the result (which is referred to as "discounted reciprocal tariff rate"). Even countries with which the US has a trade surplus face a baseline 10% tariff. White House officials stated that these tariff rates can only be reduced if countries take trade or security actions favourable to the US, inviting affected countries worldwide to negotiate a deal with the US.

The new rates are generally imposed additionally on all imports, except for products set out in Annex II of the executive order, (such as copper, pharmaceuticals, most but not all semiconductors, and lumber) and products that are already subject to tariffs under Section 232, such as steel, aluminum, cars, and car parts; for Canada and Mexico, current rules targeting fentanyl and migration stay the same. USMCA-compliant goods will still have no tariffs, while goods that do not meet USMCA rules face a 25% tariff, except for energy and potash, which get a lower 10% rate. If those fentanyl / migration orders end in the future, USMCA goods would still get special treatment, but non-USMCA goods would then face a 12% tariff instead.

Under the current US tariff structure, countries now face combined rates, meaning all applicable tariffs are added together unless specific exemptions apply. For example, China’s tariff rate (already at 20% due to earlier country-specific measures) was raised to 54% under the new reciprocal tariff regime. In contrast, the EU, which was previously only subject to product-specific tariffs, under the general scheme would now all face a tariff rate of 20% (the official list of all current country-specific tariff rates is published in Annex I of the executive order). Notably, tariffs on aluminium, steel, and automotive products remain governed by separate Section 232 measures and are explicitly exempt from the reciprocal tariff regime.

However, on 9 April 2025, President Trump announced a temporary suspension in the reciprocal tariffs. Citing interest from multiple countries in negotiating lower trade barriers, he stated that the tariffs would be reduced to a 10% base rate for a period of 90 days for all countries except China whose rate was increased to 145% (originally 125% were announced however, on 10 April 2025 the administration has just confirmed that figure did not include a pre-existing tariff of 20%, which is being added on top - bringing the total to 145%).

President Trump appears to continue using tariffs as a negotiation tool. This approach often involves the implementation of measures that are later paused once the targeted countries enter into negotiations, as recent developments have demonstrated. As a result, the imposition of such measures remains highly dynamic. It is therefore essential to closely monitor all changes on an ongoing basis to ensure that no amendments are overlooked.

Threatened measures

On 27 January 2025, President Trump announced that new tariffs on computer chips, semiconductors, and pharmaceuticals would be imposed, however so far neither the legal basis has been named not concrete dates or measures have been published. 

On 21 February 2025, the President directed the USTR to resume investigations under Section 301 of the Trade Act of 1974 into the digital services taxes (DSTs) of France, Austria, Italy, Spain, Turkey, the UK, and to consider a USMCA panel against Canada. More broadly, he instructed Treasury, Commerce, and the USTR to identify foreign regulations that harm US companies and recommend countermeasures, including tariffs. So far no official result have been presented and no further measures implemented. 

At the end February and beginning of March 2025, President Trump also ordered the Commerce Department to initiate a Section 232 national security investigation into copper, timber, lumber, and derivative imports. The findings of the report are due by 25/26 November 2025.

Furthermore, President Trump has issued a series of informal tariff threats in recent weeks. On 9 April 2025, President Trump announced plans to impose a “major” tariff on pharmaceutical imports, stating it would encourage drug companies to relocate operations to the US.

Countermeasures and policy reaction of key US trading partners

Given the major disruptions to the international trade order caused by President Trump's tariff measures, that affect almost all countries in the world, a variety of key US trading partners have already reacted with (or threatened) countermeasures. 

The EU

In response to renewed US tariffs under Section 232, the EU announced a phased reactivation and expansion of retaliatory measures targeting US exports. The EU lifted its suspension of previously adopted tariffs (originally imposed in response to US steel and aluminium duties implemented during the first Trump administration) applying rates mostly ranging between 10-25% on various US imports, including tobacco products, some textile products, and many iron or steel products. In a second wave, measures were announced to be extend to another EUR 18 billion in U.S. goods, covering a wide range of products, see the current listing here. Both measures were set to take effect on 15 April 2025.

However, in response to President Trump's suspension of the "reciprocal tariff" rates, on 10 April 2025, the EU announced that the measures would be postponed to create room for negotiations with the White House. Von der Leyen added: “If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues as the Commission will remain working on its response to the 25% tariff on automobiles and 10% "universal" levy that are still in force.

Therefore, if diplomatic efforts fail, the EU is expected to turn to more assertive tools in response to the US tariff measures. In addition to retaliatory tariffs already applied under the Enforcement Regulation (EU 2021/167), the Anti-Coercion Instrument (ACI) (Regulation 2023/2675) offers a broader legal basis for countermeasures. Adopted in late 2023 as part of the EU’s strategy for open strategic autonomy (initially with a focus on China) the ACI enables the EU to respond to “economic coercion” through a structured process beginning with consultations. Should negotiations break down, the regulation allows for a wide range of unilateral measures, including tariff hikes, exclusion from public procurement, and restrictions on services, intellectual property, and financial services. Although the qualification of the US tariff measures as "economic coercion" is contested, the recent escalation in both scope and tone has created a markedly hostile trade environment. In this context, it is increasingly plausible that the EU may invoke more forceful countermeasures, including those available under the ACI. The ACI is particularly appealing as it requires only a qualified majority for adoption, making it a viable tool even in the face of internal disagreement among EU Member States.

Pursuant to latest reports, the EU has considered targeted countermeasures against US sectors with significant trade surpluses, particularly in technology and financial services. While the EU consistently maintains a trade surplus in goods, it ran a EUR 109 billion trade deficit with the United States in services in 2023, making these sectors strategic pressure points in the EU’s potential response.

The UK

As of 9 April 2025, the United Kingdom has not implemented retaliatory tariffs in response to the recent US tariff measures. To prepare for potential responses, the UK has initiated a consultation process with domestic businesses, seeking input on the implications of possible retaliatory measures. A comprehensive 417-page list of US products has been published, detailing goods that could be targeted in any future UK action. This list includes items such as meat, fish, dairy products, whiskey, rum, clothing, motorcycles, and musical instruments.

China 

China, being one of the most affected countries of the US tariff measures, has reacted swiftly to the imposed measures. In retaliation to the US measures under the IEEPA, 10% and 15% tariffs were imposed on USD 13.9 billion of US exports (including agricultural equipment and oil) effective from 10 February 2025, followed by similar tariffs on an additional USD 19.5 billion (primarily agricultural goods) effective 10 March 2025; under a broader retaliatory measure, a sweeping 34% tariff was applied to the full USD 144 billion of US exports. On 11 April 2025, this rate was increased to 125% in response to Trump's "reciprocal tariff" measures. China also initiated an antidumping investigation and suspending imports of certain US agricultural products from specific US exporters.

Regarding non-tariff measures, China has implemented export controls on several key rare earth elements vital to industries such as electronics, clean energy, and defence. Furthermore, 16 US defence and tech firms were added to the Export Control List and 11 US entities were added to the Unreliable Entity List. 

Furthermore, China filed WTO complaints regarding the US tariff measures on Chinese imports and regarding the US universal and country-specific additional duties on imports from China.

Canada

As part of its IEEPA fentanyl retaliation, Canada imposed 25% tariffs on USD 20.8 billion of US exports (effective 4 March 2025), with an additional USD 86.7 billion introduced on 23 March 2025, and announced a 25% tariff on electricity exports from Ontario to the US, which is currently suspended. In response to US Section 232 measures, Canada also applied 25% tariffs on USD 20.7 billion in US steel and aluminium exports effective 13 March 2025, and introduced a further 25% tariff on USD 30.5 billion worth of US automotive exports under its Section 232 auto retaliation framework.

Canada also filed WTO complaints regarding the US tariff measures on cars and car parts, the measures on aluminium and steel as well as the country specific measures on Canada. 

Generally, according to the US national economic council director Kevin Hassett, more than 75 countries have contacted White House to start trade talks. This reflects the general willingness of countries to avoid immediately resorting to potentially self-destructive retaliatory measures, opting instead to pursue negotiations aimed at easing tensions. This approach has already shown some impact in the context of the reciprocal tariff regime.

Effects on businesses operations

Direct effects of the measures

The US administration's announcement of sweeping and unprecedented tariffs on imports from nearly all countries, although now temporarily lowered with respect to the reciprocal scheme, is expected to have immediate and far-reaching effects on global trade as a whole. These measures, broad in both scope and sectoral impact, risk significantly disrupting global supply chains and trade flows. Early market reactions (evident in recent stock market volatility) underscore growing investor concern about the broader economic fallout, including inflationary pressures, supply shortages, and reduced consumer and business confidence. If sustained, such disruptions could destabilise global markets and amplify geopolitical tensions.

With regard to EU businesses, given the US is the EU's largest export market, the impact of the measures will likely be cross-sectoral. However, different segments will likely be impacted differently depending on their dependency on export and the US as a market, also with regards to investments. Within the major EU industries, particularly the automotive (with total import value of USD 203.6 billion in 2023), pharmaceutical (with a total import value of USD 203.2 billion in 2023) and machinery (with a total import value of USD 207.8 billion in 2023) sectors are vulnerable to measures. While the pharmaceutical industry was largely exempted under the latest "reciprocal tariff" regime, recent warnings from the White House suggest that the industry is not off the hook. The EU automotive industry (already navigating significant transitional challenges) is particularly vulnerable to the new US tariff measures. The 25% tariff on all passenger cars, combined with parallel actions against Canada, Mexico and China, is expected to cause major disruptions due to the highly integrated and cross-border nature of automotive supply chains. Given that many leading EU car manufacturers depend on components and production processes spread across multiple jurisdictions (particularly Mexico) the new US tariff measures risk inflating costs, disrupting supply chains, and delaying production. This adds further strain to an industry already facing significant pressure.

Indirect effects and potential retaliatory measures

Beyond the immediate cost impact, the expected wave of countermeasures from affected US trading partners is likely to create significant disruption for cross-border businesses by driving up prices, straining supply chains, and adding volatility to international trade flows. Early studies also forecast a decline in global GDP, fuelling broader uncertainty and caution in business operations and future investment decisions.

Also, businesses will also face indirect effects caused by the shift in global trade dynamics and countermeasures implemented by US trading partners. For example, major import markets such as the EU may face pressure due to further shifts in trade flows. Products previously exported from other countries to the United States could now seek new markets, potentially leading to increased strain on affected domestic industries and the possibility of related protection measures. This trend, seen during the previous Trump administration, is already reemerging as evidenced by mounting pressure on the EU steel industry from global overcapacity and rising Chinese exports leading to the launch of related trade defence investigations by the European Commission. 

However, also with regards to more specific countermeasures, businesses could face adverse effects. For example, targeted countermeasures under the EU ACI (such as those being discussed against the US banking and tech sectors) could also carry significant risks for EU businesses. Measures like restricting US financial services, limiting capital market access, or capping investments could trigger unintended consequences across the EU economy. Experts caution that such actions may disrupt the flow of essential US capital, particularly in high-risk and innovation-driven areas like venture capital and digital technologies, where EU alternatives are still underdeveloped.

Outlook

Looking ahead, the ongoing US tariff dispute is likely to have ripple effects on both the international trade framework and day-to-day business operations. At the multilateral level, despite a broader shift away from a rules-based international trade system and the continued blockage of the WTO Appellate Body, the WTO dispute settlement mechanism continues to serve as a mechanism through which states can formally register opposition to trade measures and coordinate political responses. The complaints recently brought by China and Canada illustrates that the WTO, while procedurally limited, is still being used as a forum to challenge protectionist measures. It is therefore expected that other affected countries, including key US trading partners, will similarly turn to the WTO to contest the legality of the new tariffs and reinforce their positions on the global stage.

On a business-operational level, the uncertainty created by the tariffs is already affecting global business operations. This is fueled by the dynamic of frequent implementation and revocation of measures, which contributes to an unstable and unpredictable overall environment. Companies are putting cross-border deals on hold (particularly those involving the movement of goods) due to concerns over shifting cost structures and regulatory unpredictability. Access to debt financing for international transactions is also tightening, as funders adopt a cautious stance while waiting to see how the trade landscape evolves. In the near term, businesses can expect increased complexity in supply chain planning, higher compliance costs, and the need for more dynamic risk assessments when entering into international contracts. 

While the evolving US trade policy under the Trump administration poses challenges, it also opens up strategic opportunities across sectors especially those aligned with the Trump administration's push for reindustrialisation. Increased investment in infrastructure, energy, and domestic manufacturing is expected to drive demand for advanced technologies, equipment, and services within the US This creates room for globally competitive firms (particularly those offering high-value, innovation-driven solutions) to strengthen their presence in the US market despite a more protectionist environment. Similarly, potential countermeasures by trading partners like the EU, for example targeting financial and digital services may impose significant pressure on affected sectors and risk substantial disruption. However, they also present a strategic opportunity for EU-based competitors to fill gaps in the market and strengthen their position in key service areas.

See our Global trade tariffs and business resilience resources page for more Ashurst publications on this topic.