The place EU tariffs will hit hardest

The latest information on tariffs and shopper decision-making is obvious: elevate costs on a product attributable to larger import taxes, and customers will flip to a less expensive various.

That does not bode properly for sure U.S. merchandise, and the states the place they’re produced, because the U.S. and EU have interaction in tit-for-tat tariff threats. Assume California almonds, Tennessee whiskey, and rearview mirrors from Michigan.

From 2017-2019, Tennessee whiskey exports to the European Union dropped from $362 million to $220 million amid President Donald Trump’s first time period commerce struggle, and exports remained low till the retaliatory tariffs have been suspended, in keeping with a latest analysis report from Commerce Partnership Worldwide. The 2018 Trump tariffs have been suspended by the Biden administration in January 2022.

“As soon as the EU lifted the tariffs, Tennessee’s whiskey exports elevated 42% within the 12 months after,” mentioned Daniel Anthony, president of Commerce Partnership Worldwide. “However Tennessee exporters understand how retaliation might once more scale back gross sales.”

On Thursday, Trump threatened 200% tariffs on EU wine and alcohol, and mentioned he “just isn’t going to bend in any respect” with regards to U.S. tariffs levied on different nations’ imports. His Treasury Secretary, Scott Bessent, advised CNBC he does not perceive why the markets would make a giant deal out of this menace, however for some U.S. states, the EU is a giant market.

In contrast to the tariffs imposed by the Trump administration, the place U.S. shippers need to pay the tariffs with a purpose to obtain their merchandise, reciprocal tariffs could be imposed on U.S. exports that are paid by EU importers. The upper costs might both drive down demand or shut down a market.

“There’s an expectation firms will lose gross sales as EU customers shift to inexpensive choices,” Anthony mentioned.

Information compiled by Commerce Partnership Worldwide exhibits that the worth of U.S. exports that might be topic to tariffs would enhance five-fold, from $6 billion (primarily based on the unique Trump tariffs) to over $27 billion.

“This can be a main tariff enlargement on earlier exports,” Anthony mentioned. 

EU retaliatory tariffs are set in two tranches — the merchandise hit final time which might be being reupped on April 1, after which the enlargement of further merchandise, topic to additional dialogue, which might be enacted in mid-April.

On a share foundation, new evaluation on the EU retaliatory tariffs exhibits New York and North Dakota firms doubtlessly having the best share of exports within the retaliation crosshairs, which might influence demand on their items: New York (39%), North Dakota (36%), Nebraska (32%), Iowa (26%), and West Virginia (26%).

On an absolute greenback foundation, a few of the states on the East and Gulf Coasts with main ports are among the many high states dealing with new EU tariffs, together with New Jersey, Georgia, North and South Carolina, Virginia, and Texas. Merchandise from these states vary broadly, from casks for alcohol brewing to tobacco and tobacco merchandise, peanuts, frozen and recent orange juice, meals oils, bikes, dishwashers, clothes, footwear, furnishings, and carpets.

However Anthony mentioned it’s the California almonds, Tennessee whiskey, and rearview mirrors from Michigan that stand as a few of the finest examples of acute threat and market want — “the EU is the largest purchaser of those merchandise and retaliatory tariffs will harm far more.”

Brandon Daniels, CEO of company threat administration advisor Exiger, mentioned the retaliatory EU tariffs place American whiskey producers at a considerable aggressive drawback.

“States like Tennessee and Kentucky, whose economies rely considerably on this luxurious export, would really feel acute financial stress. That is the place politics and commerce coverage collide in the meanwhile,” mentioned Daniels.

Firms in Tennessee exported $575 million in whiskies to the EU in 2024 (66% of its exports to the world). 

In 2024, California exported $1.2 billion in shelled almonds to the EU. The European Union represents 37% of California’s exports to the world.

Out of Michigan, firms exported $519 million in rear-view mirrors to the EU in 2024 (48% of its exports to the world).

Within the auto sector, firms have extra room to barter.

“In earlier tariff conflicts, we have seen that U.S. exporters of important automotive elements — similar to precision electronics from Michigan — typically partially take up retaliatory tariff prices,” Daniels mentioned. “Whereas important elements will proceed to circulation, American producers usually share tariff ache with their European consumers, as neither facet can afford to bear the complete price alone. This shared burden highlights how interconnected the automotive provide chain actually is.”

Purple states past the whiskey states will really feel the ache

On this planet of producing, molybdenum, which is used within the manufacturing of metal, lubricants, pigments, and as a catalyst within the petroleum trade, is a big export for Arizona to the EU. In 2024, Arizona exported $304 million in molybdenum to the EU (89% of its exports to the world).

South Carolina exported $223 million within the versatile polymer ethylene copolymers to the EU in 2024 (59% of its exports to the world). This chemical is utilized in packaging, hot-melt adhesives, automotive elements, and development supplies, due to its sturdiness, flexibility, and adhesive properties.  

A number of different plastic resins additionally topped the checklist for South Carolina, and West Virginia, the place firms exported $146 million in plastic resins to the EU in 2024 (59% of its exports to the world).

In some areas, the present U.S. commerce imbalance will affect negotiating.

With a document items commerce deficit of almost $236 billion in 2024, the U.S. depends on Europe for high-value manufactured items like automobiles, prescribed drugs, and industrial gear. However these are sectors the place U.S. negotiators have significant leverage by focused tariffs, Daniels mentioned. 

European automakers exported roughly $54 billion price of automobiles to the U.S. in 2022, dwarfing American automotive exports to the EU. A focused U.S. tariff on this sector would place important stress on European producers — notably Germany, whose auto trade alone includes over 30% of Europe’s whole exports to the U.S., he mentioned.

Based on customs information tallied by Exiger, prescribed drugs signify Europe’s largest export class to the U.S., at almost $92 billion yearly.

“Whereas concentrating on prescribed drugs by tariffs may be politically delicate, it will instantly influence European pharmaceutical giants, creating sturdy incentives for Brussels to barter. Though the 200% enhance on wine and liquor that Trump introduced might harm, it isn’t going to rebalance commerce,” Daniels mentioned.