Analysis by Flick Gocke Schaumburg, Taxand Germany
Tariffs have once again become a focal point in global trade, with the US announcing a comprehensive tariff package that has significant implications worldwide. The European Union, facing a 20% tariff, and other nations are adjusting to this new economic landscape.
The measures are a response to the US’s imposition of flat tariffs on imports, with the EU and Germany particularly affected due to their strong trade ties. The situation has led to disruptions in international supply chains and potential legal disputes.
In light of these developments, the EU has prepared countermeasures, and Germany is advocating for a pragmatic trade policy within the EU, aiming to reduce trade conflicts and promote free trade agreements.
For a detailed analysis of the tariffs and their impact on global trade, see the article below by authors Rainald Vobbe, Peter Reingen and Sebastian Moos of Flick Gocke Schaumburg.
The renaissance of tariffs
The topic of tariffs is currently dominating the headlines and, alongside politics, is preoccupying companies and investors to an unprecedented extent. Historically, tariffs have mainly served to generate revenue, but today the focus is on their function as protective tariffs aimed at protecting national industries. The creation of the EU single market and the dismantling of trade barriers through free trade agreements had pushed tariffs into the background until recently.
They have been dominating the news again at the latest since 4 April.
In his first presidency between 2017 and 2021, US President Donald Trump coined the phrase “Tariffs are great”. The tariffs imposed by decree on solar panels, washing machines, steel and aluminium at the time resulted in countermeasures by the EU on products such as whisky, peanut butter, motorbikes and jeans.
On 2 April 2025, the so called Liberation Day, the President of the United States announced a comprehensive tariff package for the US resulting in the introduction of flat tariffs of 10% on almost all imports into the US as of 5 April 2025 and “reciprocal” tariffs on goods imported from countries listed in the respective Executive Order as of 9 April 2025. The European Union is affected with tariffs of 20%, while imports from Switzerland, for example, are subject to 31%. As more than 75 countries including the EU have entered into dialogue with the White House the US president announced to postpone the reciprocal tariffs for 90 days. Nevertheless, the flat tariffs of 10% remain in force.
However, the USA recently announced that certain electrical goods such as smartphones and computers will initially be exempt from this. This is contained in a document from the Customs and Border Protection Agency, which lists around 20 products, including hard disks, semiconductors and flat screens. This exemption also applies to such products from China. US tariffs against Chinese products now total 145 percent. China recently retaliated with counter-tariffs of 125% and announced to suspend exports of certain critical minerals and magnets important to the semiconductor industry and the global industrial manufacturing of electrical goods.
EU response and implications for German companies
The measures of US economic policy leave almost no one in the globalised world untouched. The US is one of the most important trading partners not only for the European Union, but also for Germany in particular as a major export nation. The German economy is therefore particularly prone to trade barriers caused by the current changes in customs duties. The current distortions are leading to disruptions in international production and supply chains. In contrast to the COVID-19 pandemic, in which the flow of goods was disrupted by lockdowns, it is now trade barriers erected at short notice by the United States and subsequently other countries that are making it necessary to adjust supply chains. At the same time, it is difficult to predict how adjustments will counter any barriers in the longer term due to the ongoing backlash. As companies have often concluded long-term supply contracts with customers in the US and it is therefore not always possible to pass on the tariffs, there is a risk that transatlantic supply relationships will be disrupted in the short term or that companies will be exposed to significant additional burdens. The newly erected trade barriers are therefore also likely to result in cost-intensive legal disputes, which could have an additional negative impact on international trade. This overall situation is leading to great uncertainty among companies and investors, which is reflected not least in the extensive share price losses on the stock markets.
The uncertainty is exacerbated by other impending measures, such as the extension of proceedings under Section 232 of the Trade Expansion Act to other product groups. It is also worth noting that the USA, which does not have a VAT system comparable to that of the EU, regards (import) VAT as a type of customs duty when assessing existing trade barriers. This view could contribute to the US government categorising the level of import duties in the EU or Switzerland as higher than it actually is. In addition, further external influences on the EU market are to be expected. As a result of the new US tariffs, manufacturers may try to sell more of their goods in the EU, which could lead to increased competitive pressure. This could result in falling market prices
In response to the US tariffs on steel and aluminium at the time, the EU imposed its own tariffs on American products such as Harley-Davidson motorbikes, bourbon and peanuts in 2018. This time, too, the EU has planned initial countermeasures in response to the US tariffs on steel and aluminium products introduced in March, which are aimed at a range of US products and are intended to offset the economic damage to EU steel and aluminium exports and come into force again from 15 April 2025. On the one hand, this concerns the measures that were already introduced from 2018 with the implementing regulations (EU) 2018/886 and (EU) 2020/502, such as additional tariffs on Harley-Davidson motorbikes and jeans whereas individual exceptions to this, such as for bourbon, were agreed at EU level due to concerns from Italy and France in particular, in order to prevent the threat of counter-tariffs in the USA, such as on wine. On the other hand the EU member states have decided to introduce additional tariffs on products such as steel and aluminium products, textiles, leather goods, soy beans and beef (link). The additional EU tariffs for goods imported from the US were planned to come into force as of 15 April 2025. Due to the announcement of the US-President to postpone the reciprocal tariffs for 90 days the EU decided accordingly and postponed the additional tariffs as well. This decision appears surprising since the additional tariffs are meant to be a reaction to the tariffs on steel, aluminium and cars introduce by US government in March.
Although the reciprocal tariffs are postponed for 90 days the basic additional flat tariff of 10 % remains in force. The main goal of the EU is to find negotiated solutions such as a mutual lifting of tariffs on industrial goods similar to what was envisaged in the free trade agreement TTIP. This would certainly be the most favourable “deal” for wider range of companies and consumers on both sides of the Atlantic. However, many of the concerns that existed at the time of the TTIP have not been dispelled and there are fears that agreements could now be reached prematurely.
Nevertheless, possible countermeasures are currently being prepared by the EU such as the introduction of an EU digital tax.
According to recently published coalition agreement between CDU/CSU and the SPD Germany should advocate for a pragmatic and rules-based trade policy at the European level. Trade agreements should follow the “EU-only” principle. Germany aims to conclude additional trade and investment agreements. It will swiftly ratify the already signed EU framework agreement with Chile. Germany actively supports the EU agreements with Mercosur and Mexico in the Council and will ratify them promptly. It backs the ongoing EU free trade negotiations with India, Australia, and ASEAN countries. In the medium term, Germany seeks a free trade agreement with the United States, while in the short term it aims to avoid trade conflicts and reduce import tariffs on both sides of the Atlantic. As part of a new Africa strategy, Germany intends to deepen trade relations with African states. The economic partnership agreements previously submitted to the Bundestag by the former government—with Côte d’Ivoire, Ghana, Cameroon, and the SADC-EPA states—will be ratified by 2025. Furthermore, Germany will promptly ratify the investment protection agreements between the EU and both Singapore and Vietnam.
Outlook
It should be noted that the overall situation remains unclear. The short-term perceived easing of tensions worldwide due to the 90-day suspension of reciprocal tariffs should be used to analyse existing supply and production structures. The goal should be to develop alternative plans for reorganizing these processes in order to be able to respond ad hoc to further developments. This may also include including clauses in supply contracts that distribute the inherent risk of a rapid increase in customs duties between the parties.
If imports become increasingly subject to customs duties again in the future, companies that previously did not have to deal with them, or only marginally, will automatically focus on the issues that have been prevalent in customs law to date. These include, for example, non-tariff exemptions, rules on the origin of goods, customs tariff classification of the respective goods and questions of customs valuation law. With regard to customs valuation law, the inclusion of licence payments, split-off purchase price components or transfer price adjustments in the customs value are of particular relevance.
When concluding new supply contracts, companies should endeavour to cushion the risks of new levies arising in the future by including appropriate clauses.