Coface, new US tariffs a further brake on EU competitiveness

(Il Sole 24 Ore Radiocor) - The agreement between the United States and the European Union on tariffs represents an "unbalanced compromise" that "avoids the worst, but further weakens European competitiveness". This is underlined by Coface, a leading global player in trade credit risk management, commenting on the 15% rate for 70% of EU exports to the US. "This compromise", the analysts comment, "avoids the threat of a 30% tariff initially envisaged by the US president, but still remains well above the 1.2% rate applied in 2024", the analysts point out, highlighting how the feasibility" of Brussels' commitments to invest USD 600 billion in the States and purchase USD 750 billion of US energy products over three years is "called into question".

Despite 'its unbalanced nature, this agreement puts the EU in a relatively privileged position' Coface points out, explaining that 'only the UK enjoys more favourable treatment, while Japan will also face a 15% tariff rate, Indonesia and the Philippines 19% and Vietnam 20%'. Then there are the countries without an agreement - Canada, Mexico, South Korea and Brazil - against which Trump threatens tariffs of between 25% and 50%. This 'hierarchization' of US trading partners confirms the Trump administration's bilateral negotiation strategy, which favours bilateral power relations over multilateral agreements.

The impact on European companies will be particularly severe in several key sectors. The steel industry remains subject to 50% tariffs, while automotive, chemicals and machinery now face 15%. For the automotive sector, already weakened by Chinese competition, this tax represents a further setback in a crucial US market. "The challenge is even more complex considering that the 13% appreciation of the euro against the dollar since January is exacerbating the loss of price competitiveness," Coface points out. "Assessing the economic impact of these tariffs largely depends on who will absorb the higher costs along the value chain, i.e. European exporters (and their suppliers) through to US consumers." Recent surveys conducted by the Federal Reserve's regional banks suggest that US businesses and consumers are absorbing nearly 90 per cent of the additional costs from tariff increases. However, for some easily substitutable products, the impact may be greater for European exporters. The ability of European companies to absorb the burden of tariffs already appears limited in sectors such as steel, chemicals, and automobiles'.

"The trade agreement reached between the EU and the United States appears to be a pragmatic solution to avoid an even more damaging escalation, but it leaves an obvious imbalance emerging that negatively affects the competitiveness of European companies, particularly in strategic sectors for Italy such as automotive, steel and chemicals", comments Pietro Vargiu, Country Manager Coface Italy. "In this context of increased tariff pressure and currency volatility, it is crucial for Italian companies to implement targeted strategies to effectively manage commercial and financial risks. For our part, as Coface, we confirm our utmost commitment to supporting companies with customised solutions and advanced tools, enabling them to mitigate the impact of new tariff barriers and seize every opportunity for sustainable growth in international markets".