“I, Donald J Trump, President of the United States of America, declare that various underlying factors, including the absence of reciprocity in our bilateral trade relationships, differing tariff rates and non-tariff barriers, along with the economic strategies of our trading partners that undermine domestic wages and consumption, represented by significant and ongoing annual US goods trade deficits, present an unusual and extraordinary threat to the national security and economy of the United States.
“This threat primarily originates external to the United States, stemming from the domestic economic strategies of crucial trading partners and structural imbalances in the global trading landscape.
“I hereby announce a national emergency in response to this critical threat.”
This is how the executive order, signed in the Rose Garden of the White House yesterday evening, has initiated what could be the most significant disruption to global trade since World War II.
This emergency has quietly developed in the US with the complicity of prior administrations. In the words of the White House communications team: “Having been let down by career politicians for decades, President Trump is implementing fair trade policies that will restore our workforce, revitalize our economy, and ultimately put America First.”
President Trump articulated that the concept behind reciprocal tariffs is simply, “what they charge us, we charge them.” If this holds true, the EU would have minimal grounds for complaint.
Charts depicting tariffs imposed by the US on other nations
The executive order references World Trade Organization (WTO) data regarding the “most Favoured Nation” (MFN) tariff rates, which reflect the average tariff conditions applied by countries to their fellow WTO members.
Trump noted that the US MFN tariff rate stands at 3.3%, while the EU’s is 5%, China’s is 7.5%, Brazil’s is 11.2%, and India’s is 17%.
How, then, did the US find itself accused of imposing a 39% tariff on its own goods, as pointed out in the chart presented by the president at his press conference? Fortunately, he decided to reduce that to a more generous 20% as the new “reciprocal” tariff on EU products, exempting cars and steel, which face a distinct 25% tariff rate.
The explanation lies in two areas: non-tariff barriers, such as technical, health, or environmental regulations, and value-added tax (VAT).
The sales tax, enforced in approximately 150 nations, including the EU, is viewed by the Trump administration as an additional tariff on US imports.
This perception is flawed; it is a sales tax applicable to all products, irrespective of their origin.
While the US lacks a national sales tax, individual US states impose their own sales taxes. Moreover, as previously highlighted, the Heritage Foundation’s Project 2025 blueprint, intended for the second Trump administration, recommends the introduction of a VAT-like tax in the US as a pragmatic fiscal policy.
Post-Brexit tensions
European nations are unlikely to permit US goods to bypass VAT regulations while EU manufacturers are subject to VAT—it could incite significant backlash.
Furthermore, they are not inclined to relinquish a valuable and stable income source.
Consequently, VAT discussions are unlikely to advance; it remains a point of contention. Notably, the UK, an ex-EU member, charges VAT yet is only subjected to a 10% tariff by the US, which renews the focus on Northern Ireland and the Windsor Framework provisions.
It has been noted in the Signal leak related to the bombing in Yemen that the current US administration harbors significant disdain for the EU, suggesting that this discrepancy may align with what US President JD Vance referred to as “the president’s messaging about Europe,” supposedly heightening post-Brexit uncertainty.
This is particularly relevant in the context of Ireland.
Donald Trump displays a copy of the 2025 National Trade Estimate Report
However, the executive order clearly expresses considerable dissatisfaction with the EU, which is elaborated in the recently published 2025 US Trade Representative’s report on foreign trade barriers, highlighting the “EU red tape” that is unfavorable to American interests.
The issues cited include import barriers and licensing limitations, customs barriers, inadequacies in trade facilitation, technical trade barriers, sanitary and phytosanitary measures that impose unnecessary trade restrictions without enhancing safety, and deficiencies in patent, copyright, trade secret, and trademark protections, among others.
Strangely, the executive order excludes pharmaceuticals from the specified “ad valorem rates of duty.”
Concerns about potential tariffs impacting Ireland’s most valuable export to the US have been mounting for over a year, particularly following President Trump’s campaign remarks about the relocation of US pharmaceutical companies and his plans to compel their return.
To date, however, no duties have been imposed on products such as Viagra or Botox.
Presumably due to uncertainties surrounding their effects on US supply chains, vulnerabilities highlighted during the Covid-19 pandemic.
Yet Ireland is explicitly mentioned in the executive order, presumably for not consuming enough products. The order notes that consumption represents 68% of US GDP, earning the moniker ‘the consumer of last resort.’
In contrast, the report states that the consumption share is significantly lower in other export-driven economies.
It identifies the leading culprits, starting with Ireland—where consumption constitutes 27% of GDP—followed by Singapore (31%), China (39%), South Korea (49%), and Germany (50%).
Howard Lutnik emphasized the VAT issue during a recent television appearance
How has this situation arisen? On The Hannity Show on Fox News, US Commerce Secretary Howard Lutnik faulted “soft politicians” for allowing foreign entities to take advantage of American industry.
“The European Union refuses American chicken. They won’t accept our lobsters. They’re dismissive of our beef because they believe theirs is inferior,” Mr. Lutnik stated.
Inferior beef? That’s a surprising claim. However, fitness initiatives for our national livestock may not be the solution; negotiations likely are.
Mr. Lutnik, however, keenly highlighted VAT as a non-tariff barrier.
He asserted that foreign governments “subsidize their producers through this VAT, while stating, ‘oh, it’s not the VAT tax.'”
“Some of these nations take that 20% tax and return it to their producers, thereby undermining our competitiveness. This must come to an end,” he concluded.
The US is clearly advocating for a significant overhaul of global trading practices. If it were simply a matter of tariff rates, that might be a simpler challenge.
Yet by incorporating various grievances—including VAT and technical trading hindrances—into the discussion, the US has broadened the scope of negotiations and expanded the number of involved countries to 60, complicating the path to resolution.
This complexity does not bode well for swift resolutions.
‘Pause and reflect’
In the interim, Treasury Secretary Scott Bessant urged the newly affected nations to refrain from immediate retaliation.
Speaking to CNN, he stated: “The message I want to convey this evening is for everyone to pause, take a deep breath, and refrain from immediate retaliation.
“Let’s observe how this unfolds; retaliating could lead to escalation, resulting in a full-blown trade war.”
European Commission President Ursula von der Leyen, whose role involves safeguarding European trade interests, was addressing an EU-Central Asia summit in Uzbekistan during these developments.
At 4 AM Irish time, she delivered a prepared statement in response to the events in Washington, with minimal mention of retaliation—although it remains a potential course of action if discussions with the US falter.
Nonetheless, retaliatory measures are being formulated as a contingency.
Ms. von der Leyen concurred with President Trump that certain countries have exploited global trading regulations and she expressed her commitment to work towards their reform. She also indicated her readiness to initiate immediate dialogues with the US aimed at dismantling transatlantic trade barriers.
Yet, she predominantly focused on the adverse effects the Trump tariffs will have, labeling them “a significant setback for the global economy,” which she claims will face tremendous repercussions.
The EC President expressed regret over the US decision, asserting that businesses of all sizes will begin feeling the impact from the inception of the US tariff regime, leading to skyrocketing operational costs associated with transacting with the US.
There was no indication of hasty retaliation.
Additionally, there were no signs of merely sitting back and taking a deep breath, as Ms. von der Leyen’s statement conveyed a pressing desire to swiftly engage in negotiations with the US.
The US must act with urgency as recession discussions gain traction and the mid-term elections approach in 19 months.
The duration either side can endure this tense standoff is of critical significance. Perhaps a few months before substantial damage materializes, complicating an already challenging endeavor.
Both the US and EU find themselves navigating a precarious and tumultuous landscape.
One hopes that their strategy encompasses multiple contingencies ready for deployment as needed.
