EU-US Trade Under Pressure: Tariffs and Strong Euro Squeeze European Exports
EU exporters are facing a sharp downturn in trade with the United States, as a combination of aggressive new U.S. tariffs and a strengthening euro dampens American demand for key goods like automobiles and pharmaceuticals. Recent data reveals a significant contraction in trade volumes, raising concerns for one of the world’s most critical economic relationships.
Shrinking Trade Volumes: A Double-Digit Decline
Recent figures from UN Comtrade highlight the severity of the slump. In July 2025, U.S. imports of goods from the European Union fell to approximately $53.7 billion, a sharp decline of roughly 10% compared to the same month in 2024.
The broader three-month picture is even more telling. From May to July 2025, European exports to the U.S. totaled $168.1 billion, a significant drop from the $213.2 billion recorded in the preceding quarter (February to April 2025). This earlier spike was largely artificial, driven by “front-loading”—a rush by U.S. companies to stockpile European goods before a new wave of tariffs took effect on April 2.
Sector Spotlight: Automobiles and Pharmaceuticals Hit Hard
The downturn has disproportionately affected Europe’s flagship export industries:
Pharmaceuticals: U.S. imports of European pharmaceuticals dropped to $9.5 billion in July 2025, down from $11.5 billion the previous year.
Automobiles: The automotive sector suffered an even more pronounced decline. Exports of European cars to the U.S. fell to $4.68 billion in July, a sharp decrease from $6.2 billion in July 2024. Over the three-month period, auto export values slipped from $16.23 billion to $13.6 billion.
This export weakness has directly impacted the EU’s trade balance with the U.S. The monthly trade surplus shrunk to $11.97 billion in July, nearly half of what it was a year earlier. Over the three-month span, the surplus contracted dramatically from $85.8 billion to $40.4 billion.
The Dual Headwinds: Tariffs and Currency Strength
The pressure on European exports stems from two powerful and interconnected forces:
Increased U.S. Tariffs: In a major policy shift, the U.S. administration imposed a 20% tariff on all EU imports in April 2025. Although this was partially reduced to 15% for many goods, including cars, in July, the current level remains substantially higher than pre-2025 rates, increasing the cost of European products for American consumers.
The Appreciating Euro: Simultaneously, the euro has strengthened significantly against the U.S. dollar. From around $1.02 at the start of 2025, the euro appreciated to $1.18 by September—a gain of over 8% since July 2024. This currency movement makes European goods more expensive in dollar terms, further eroding their price competitiveness.
According to Nicola Nobile, an economist at Oxford Economics, the 15% tariff, while slightly above expectations, at least provides some clarity. “Reducing policy uncertainty may offer a degree of relief,” Nobile notes, “but lingering doubts over the future direction of U.S. trade policy continue to fuel caution among businesses.”
Outlook: A Challenging Road Ahead for EU Exporters
The convergence of political and economic headwinds suggests a cautious outlook for the remainder of 2025. The second half of the year is expected to be particularly challenging as exporters begin to grapple with the full impact of the newly imposed tariffs, compounded by the risk of continued volatility in global currency markets. These pressures could strain profitability, disrupt long-standing trade relationships, and force businesses to rethink supply chain strategies.
The latest data signals a pivotal moment for EU-US trade dynamics, raising concerns among policymakers and industry leaders alike. Unless there is a meaningful easing of trade restrictions or a moderation in the euro’s strength, Europe’s trade momentum in the critical U.S. market is likely to remain subdued. Such a scenario carries significant implications for key industrial sectors, particularly automotive, machinery, and chemicals, which rely heavily on U.S. demand and are central to Europe’s broader economic stability.
