The America First Trade Policy has thrown well-established supply chains into turmoil. The most direct effect on European businesses that export goods to the U.S. will come from the 10% baseline tariff on all imports, which S&P Global Ratings thinks will persist. This will shape European exporters' competitive positions, depending on the extent to which the additional cost is passed through to customers and on the cost positions of their domestic U.S. competitors.

More significant than the baseline tariff are the strategic 25% tariffs that the U.S. administration has applied to steel, aluminum, and autos, and will most likely apply to pharmaceuticals, semiconductors, and lumber. Here, the disruption is material. Some European producers of steel, aluminum, and autos undertook significant front-running to build inventory in the U.S. before the tariffs took effect on March 12 (steel and aluminum) and April 3 (autos).

Third, and most importantly, the lack of clarity on the future settled state, even as some tentative trade deals take shape, means that businesses are struggling to plan ahead. Significant risks will remain after July 9, 2025, when the stay on reciprocal tariffs will end. If reciprocal tariffs are reimposed, one such risk is further escalatory measures from the EU, which we cannot rule out.

On the evidence of the U.K.-U.S. and China-U.S. announcements so far, it is unlikely that most of the 185 countries subject to reciprocal tariffs will be able to agree trade deals with the U.S. before July 9. Even for those that do, we expect any agreement to cover little more than the heads of agreement, with the fine detail still up for negotiation.

This implies that the uncertainty about the final settled state for European businesses' trade relations with the U.S. won't dissipate any time soon. As a consequence, we expect European businesses to continue to adopt short-term coping strategies to navigate the uncertainty. These strategies include:

• Front-running the tariffs believed to be forthcoming;
• Optimizing supply chains to build resilience;
• Delaying any decisions about investing in or relocating operations to the U.S.;
• Modifying U.S. transportation routes to minimize likely service fees; and
• Channeling price-sensitive goods that face high tariffs from the U.S. to other markets.

However, all this will increase both costs and complexity for European businesses.

What We've Seen So Far

U.S. imports from Europe and elsewhere surged in the early part of 2025

Unsurprisingly, in anticipation of the announcement of the America First Trade Policy on Jan. 20, 2025, European exporters worked hard to meet U.S. importers' demands to build inventory to avoid higher tariffs. By value, U.S. goods imports from Europe surged to $285 billion in the first quarter of 2025, 61% higher than in the first quarter of 2024, according to the U.S. Bureau of Economic Analysis.

Europe contributed over 50% of the overall increase in goods imported into the U.S. over this period. Imports from Switzerland (464%) and the EU (36%) increased notably, as did those from Taiwan (49%), Vietnam (36%), and India (30%), which are among the U.S.'s larger trading partners (see chart 1). Interestingly, U.S. imports from China and Japan only rose by 5% and 2%, respectively.

Chart 1

Imports at risk of the highest tariffs increased most

Of the first-quarter increase in U.S. goods imports, 37% comprised intermediate metal products, such as steel bars and aluminum sheets (see chart 2). This was ahead of the introduction of a 25% tariff on steel and aluminum imports on March 12, 2025.

We attribute one-quarter of the increase to significant front-running of expected tariffs on pharmaceuticals. Ireland's exports--including organic chemicals and intermediate pharmaceutical precursors--more than tripled to $52 billion in the first quarter of 2025 compared with the same period in the previous year, while Switzerland's pharmaceutical exports more than doubled to $5 billion. The stocks that Ireland has exported to the U.S. are equivalent to over nine months of consumption, taking the simplified assumption of the first quarter 2024 export level as a benchmark, delaying the impact of any prospective tariffs for those products.

Chart 2

Gold shipments from Switzerland to the U.S. increased to about $41 billion in the first quarter, according to the Swiss Federal Department of Finance

Most of these shipments to the U.S. were transfers to commodity exchange (COMEX) warehouses, which are approved storage facilities for metals, particularly gold and silver. Gold deposits in these warehouses have risen by 17 million ounces to 39 million ounces (as of May 20, 2025) since the beginning of 2025, with the deposits worth more than $54 billion.

The impetus behind the initial demand for U.S gold deposits was to avoid potential prospective tariffs. This caused a short squeeze in the gold futures market, until it was confirmed that precious metals would be exempt from tariffs on April 2. Nevertheless, COMEX gold deposits have only fallen by about 5 million ounces since peaking at 44.3 million on April 2, 2025.

As goods trade data from the U.S. Census Bureau include gold entering COMEX warehouses only if there is a sale to a U.S. resident, the small scale of the drop in gold deposits since April 2 points to significant purchases of gold and its derivatives by U.S. investors looking for a safe haven. This is also evident from the 20% appreciation in gold prices since the start of the year and 11% since the early April dip.

What Else We're Watching

The global shipping industry also faces disruption

The U.S. Trade Representative is consulting on a proposal to phase in fees on Chinese-built vessels that dock at U.S. ports, as well as on their operators and owners. This follows a Section 301 investigation that the previous U.S. administration initiated to assess China's competitive position in the maritime, logistics, and shipbuilding sector.

Under consideration in the latest proposal are service fees for Chinese vessel operators and owners. These fees are onerous, starting at $300 per twenty-foot equivalent unit (/TEU) and rising to around $840/TEU by April 2028. This could present European container liner operators with a competitive advantage if they can manage their container fleets and alliances to avoid docking Chinese-built ships in the U.S.

We see our rated container liners--A.P. Moller - Maersk A/S (Maersk), CMA CGM S.A., and Hapag-Lloyd AG--as sufficiently agile to adjust their vessel deployment so that only non-Chinese-built vessels call at U.S. ports. This would avoid any potential fees and mitigate disruptions. However, Chinese state-owned COSCO--the fourth-largest global container liner operator--will face a significant handicap as 50% of its liners by tonnage typically call at U.S. ports, according to shipping data company Linerlytica.

China's slow approval of rare earth export licenses increases the incentive for Europe to diversify suppliers. China is supposed to have suspended its export ban on the seven rare earth metals mined, processed, and refined in China after agreeing a 90-day temporary trade deal with the U.S. in Geneva. However, we understand that China's granting of export licenses has slowed down, even to European companies.

Rare earth metals are critical components in electric motors, electronics and consumer technology, and defense. This situation has made it even more imperative for the EU to implement the Critical Raw Materials Act that it enacted in May 2024. This will help the EU to diversify its suppliers and thereby reduce its dependency on China.

What We Think And Why

So far, the most pronounced impact of tariffs on shipping container volumes has been trade disruptions between China and the U.S.

Maersk, the second-largest container shipper in the world, has reported that intra-regional and emerging market activity has remained robust. This is despite China-U.S. container volumes falling sharply by 30%-40% in April 2025, following U.S. import tariffs and retaliatory tariffs by China.

In its first-quarter 2025 results from May 8, 2025, Maersk reduced its guidance for growth in global container market volumes to between -1% and +4% in 2025 from around +4% that it forecast in February 2025. This reflects increased macroeconomic and geopolitical uncertainty.

However, following the temporary tariff de-escalation between the U.S. and China on May 12, container shipping volumes have rebounded as businesses have hurried to ship goods during the 90-day pause period. Hapag-Lloyd, for instance, reported more than a 50% surge in China-U.S. bookings in recent weeks, which more than reverses the previous average 20% drop.

In our view, the complex structural issues at the heart of the U.S.–China trade conflict suggest that the countries are unlikely to settle a detailed trade agreement by Aug. 12, 2025. Consequently, there is a clear risk of further disruption along the China-U.S. shipping route if the countries reestablish reciprocal tariffs after that deadline passes. Further uncertainty stems from the supply side and the ongoing disruption in the Red Sea, which we expect to continue throughout the rest of the year.

The final trade deals remain unclear despite the stay on reciprocal tariffs due to end on July 9, 2025

Early indications are that while countries have started discussions with the U.S., it is not at all clear what the final parameters of any deals will look like. This is because the U.S. administration is aiming to largely address all sorts of issues using its trade measures.

As well as trade deficits, the U.S. administration is seeking to tackle other non-tariff barriers that it perceives as discriminatory. These even include value-added tax in Europe, which countries levy uniformly on all business, whether domestic or foreign.

Leveraging the benefits of strategic defense alliances such as the North Atlantic Treaty Organization, including in trade negotiations, creates further uncertainty and complicates efforts to resolve trade disputes in a transparent and consistent manner.

The recently announced U.S.-U.K. Economic Prosperity Deal is a case in point

Essentially, the deal is a statement of principle, reiterating both countries' desire to "deepen their trade relationship based on mutual trust and a shared commitment to fair and reciprocal trade". There is little detail on the initial agreement beyond some important tariff concessions for U.K. light vehicles, steel, aluminum, and beef. However, these concessions are all subject to fairly limited quotas and some unspecified security considerations.

This deal has raised concerns that the U.S. is seeking to reduce China's presence in its partners' supply chains. For instance, the deal could give U.K. steel producers preferential access to the U.S. market, but not producers such as British Steel if China's Jingye Group retains ownership. Nonetheless, even where the strategic 25% tariffs have been lifted, the 10% baseline tariff introduced on April 2, 2025, still applies.