From Trade Skirmishes to Trade War? Transatlantic Trade Relations During the Second Trump Administration

The transatlantic economic relationship is the most valuable intercontinental relationship in the world. It is also uniquely interpenetrated by European and American firms, which are extensively invested in each other’s markets. Absent a comprehensive trade agreement, the transatlantic economic relationship has been characterized by ‘muddling through’ within the broad framework of World Trade Organization (WTO) rules. The economic relationship between the United States (US) and Europe has periodically been punctuated by sometimes intense trade disputes. Historically, these disputes were narrowly focused and left the bulk of the transatlantic economic relationship untouched. Starting in spring 2025, the Trump administration dramatically departed from past US trade policy, imposing sweeping ‘reciprocal’ tariffs on all US trade partners as well as industry-specific tariffs on national security grounds. The European Union (EU) sought accommodation rather than confrontation, leading to a framework agreement in August. This agreement is fragile, but while it holds, it is a manifestation of ‘muddling through’, albeit under worse trading conditions than before Trump returned to office. It is possible that the relationship could deteriorate further. Keywords: European Union; retaliation; tariffs; trade; Donald Trump; United States