Donald Trump’s Greenland tariffs are no great blow to Europe
An escalating trade war would be another matter, however
EUROPEANS ARE no longer shocked by the threat of tariffs. They know President Donald Trump regards them as a fee for access to the American market, as leverage for American access to their own and as punishment for perceived slights. Since his return to office European businesses have war-gamed tariffs and adjusted their supply chains, sales contracts and distribution channels. Currently EU exports to America incur a 15% tariff; British goods are taxed at 10%. The additional 10% levy threatened by Mr Trump on the Nordic countries, Germany, France, the Netherlands and Britain for sending a tiny number of troops to Greenland, is a further nuisance (see chart). But not much more, so long as escalation is contained.
The EU exported an annualised €523bn-worth ($609bn) of goods to America in the third quarter of 2025, about 2.8% of the bloc’s GDP, and imported €360bn-worth. That was down from €547bn a year earlier; imports grew from €336bn. It is hard to know how much of the decline to pin on tariffs. In any case, Americans appear to be sharing the hit. A study by the Kiel Institute, a think-tank, finds that American importers and consumers absorbed 96% of the current tariffs, while European firms’ prices were largely unchanged. Quick analysis by the researchers finds that the 10% Greenland tariffs would shave 0.04% from the EU’s output and 0.02% from America’s. Should Mr Trump increase tariffs to 25%, as he has said he will do by the summer if Europe does not consent to his takeover of Greenland, the costs would rise to 0.08% for the EU and 0.06% for America. Hardly a recession.
Some sectors are more exposed than others to American tariffs, however, and European politicians are under pressure to respond. Total American imports of industrial equipment increased by 11% between April and October 2024 and the same period in 2025, but those from Europe (including Britain) fell by 4%. For vehicles like cars, rail carriages, boats and planes, the picture is similar. American imports nosedived by 17%, but the fall from Europe was 32%. This may partly reflect firms’ adjustment to the tariffs. Large global companies in particular will have tweaked their supply chains, serving the American market from other countries or with local assembly. Morgan Stanley, a bank, estimates that the majority of European goods companies’ revenue from America is made or assembled in the country.
To gauge European firms’ exposure to Mr Trump’s latest tariffs, we have looked at 80-odd big companies from the eight countries targeted. Their combined revenue generated in America reached about $1.1trn last year, about a quarter of their global total.
Judged solely by sales, health-care firms are most exposed. For those in our panel, sales in America average about 40% of the total. For drugmakers the share is bigger, at about half for both GSK and Novo Nordisk last year. (That said, many pharma firms are exempt from current tariffs. It is unclear whether that would apply under the new levies.) We estimate only 27% of the health-care sector’s costs are in America, compared with 40% of its revenues—a gap which is greater than in our other six sectors. Novo Nordisk, for instance, appears to have a smallish footprint in America, despite hefty sales there.
The five carmakers in our sample receive a combined $200bn from American sales (or 23% of their total). The firms most at risk are those that sell cars in America but lack factories there. Audi’s sales in America dropped by 27% in 2025, according to Automotive News. Porsche faces similar problems. Its American sales ticked up slightly last year. However, rising tariffs have contributed to a disastrous year for the luxury carmaker. Its operating profits fell by 90% in 2025.
Europe may retaliate. In March the EU prepared tariff retaliation on €21bn-worth of American goods to counter Mr Trump’s proposed levies on metals. It later added €72bn-worth to counter his "Liberation Day" tariffs announced in April. The combined set was put on hold after the EU’s humiliating truce with Mr Trump, which ended up with the 15% tariff on EU goods. But that truce may now be shelved, putting the retaliatory measures back in play. American sectors were chosen to maximise pain for Mr Trump while limiting damage to Europe. They included goods for which there were European competitors (eg, Irish whiskey to replace Kentucky bourbon) and things made in Republican districts.
Should the economic war go beyond tariffs, however, all bets are off. The EU’s retaliation list already contained a ban on the sale of scrap metal, which American smelters like to use. Export controls could be extended to sectors in which American firms and consumers might struggle to replace European suppliers. The German Economic Institute, an industry think-tank, estimates that for 532 groups of items, the EU’s share in American imports is higher than 95%. That includes aircraft (where only Airbus, Europe’s planemaker, is a contender), lithography machines for advanced chipmaking (where ASML of the Netherlands has a monopoly), military helicopters, and various chemicals and foodstuffs.
Digital and services sectors would be largely unchartered territory for a full-on trade dispute. Through regulation, the EU tunes American companies’ access to the European market. Its attempts to contain their market power or to regulate harmful content have already provoked furious responses from tech firms and Mr Trump alike. The EU could tighten the screws further. It could, for instance, push American tech giants out of government tenders. Financial firms’ access to the European market could also be curbed.
Europeans’ vast holdings of American assets might also seem to provide leverage. But mass dumping of tech shares or government bonds looks highly unlikely. Governments do not have the legal powers to dictate private investors’ asset allocation. Taxing such holdings might be workable, but could lower the value of the assets. And if Europeans wanted to sell en masse, they would need to find buyers.
Moreover, America has ample means to respond. Export controls on military equipment could harm Europe’s own military production. Digital retaliation could undermine Europe’s ability to use American cloud providers. The dominance of the dollar and America’s financial system could be used against European banks and businesses. And the threat to cut off Ukraine from American kit and intelligence will linger in the background. However you slice it, America has more leverage over Europe than vice versa.
Except, maybe, in football: this summer America is co-hosting the FIFA World Cup with Canada and Mexico. Only European and South American countries have ever won the competition; they are the star turns. Staying away would be a blow to Mr Trump’s pride, at little economic cost.
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