The European Union is on the brink of a potential economic disaster—a staggering $1.25 trillion setback—if President Trump implements his proposed tariffs. This warning comes from a recent report by Germany’s leading economic think tank.
The German Economic Institute (IW) has issued a report highlighting the immense risks the EU faces should it fail to address the trade imbalance. President Trump’s America First trade strategy proposes a 20% tariff on EU goods and a 25% duty on car imports, aiming to rectify past deals that unfairly favored Brussels.
If these tariffs materialize without a compromise, the EU could suffer losses between €780 billion and €1.1 trillion from 2025 to 2028, with devastating impacts across the continent.
Germany, as Europe’s economic powerhouse, stands to suffer the most, facing a potential annual GDP decline of up to 1.6%. The nation could see a loss of €180 billion ($205 billion) in output by 2028, hitting export-driven sectors like auto manufacturing and pharmaceuticals particularly hard. These sectors have long benefited from access to the American market.
In 2024, trade between Germany and the United States reached €253 billion ($287.5 billion), marking the US as Germany’s top trading partner. However, this prosperous relationship is under threat as President Trump seeks to secure better conditions for American workers and businesses.
Although Trump has paused the tariffs for 90 days to allow for negotiations, discussions with EU officials have made little progress. European Commission President Ursula von der Leyen’s “zero-for-zero” industrial tariff proposal was rejected by Trump, who insisted on a commitment from the EU to purchase $350 billion in US energy before reconsidering the tariffs.
With Brussels refusing to budge, the EU is faced with a pivotal decision: uphold its outdated globalist trade practices or brace for an economic storm of its own making.
However, there may be hope for diplomacy. Italian Prime Minister Giorgia Meloni, a rising star among Europe’s nationalist leaders, met President Trump in Washington to potentially smooth relations.
Giorgia Meloni welcomed with honor by Trump.
— RadioGenoa (@RadioGenoa)
April 17, 2025
During a White House lunch, Meloni—one of the few European leaders with a close personal rapport with Trump—expressed optimism about reaching an agreement, stating, “I’m here to help with that.” Trump echoed her optimism, asserting that a deal was “100 percent” possible, provided it’s fair.
While Meloni criticized the initial tariff proposal, she emphasized unity and reaffirmed America’s role as a “reliable partner.” As the first European leader to meet with Trump amid the trade conflict, her visit could represent a change in tone and pave the way forward if Brussels is willing to negotiate.
