EU tariffs drop to 10% as VW slashes 100,000 jobs
A new wave of US tariffs has erased the UK's trade advantage over the EU, while Volkswagen's deepening crisis in China threatens up to 100,000 European jobs.
Donald Trump has announced a new round of tariffs targeting more than 80 countries, reducing the EU’s near-blanket levy from 15% to 10%. This aligns the bloc’s tariff rate with the 10% deal the UK struck last year, removing the competitive edge British exporters previously held over their European counterparts.
The broader US tariff regime is expanding, with the Yale Budget Lab calculating the average statutory rate will now hit 12.8% rather than falling to 9.8%. However, John Wyn-Evans, head of market analysis at Rathbones, argues the burden will "mostly fall on US consumers and importers" as the president uses trade policy as a "convenient stick".
European corporate pressure mounts
The tariff shifts arrive as Europe’s industrial base faces severe strain. Volkswagen has slashed its revenue forecast, now expecting a decline of up to 3% on last year’s €321.9bn due to a brutal sales slump in China. The German carmaker is pushing through a cost-cutting programme that targets up to 100,000 job cuts, double the number previously agreed with unions, after its supervisory board rejected plans to shut four German factories.
Geopolitical trade frictions are also spilling into defence procurement. Unite union general secretary Sharon Graham has warned it would be a "massive mistake" for UK mayor Andy Burnham to award a £2.4bn military satellite contract to US firm Lockheed Martin over the European manufacturer Airbus. Graham cautioned that choosing the American rival could put 600 jobs at risk at Airbus sites in the UK, though the company is headquartered in France.
Markets react to Middle East oil shift
European markets pushed higher on Friday, with the Stoxx Europe 600 rising 0.5%, driven primarily by a sharp drop in oil prices. Brent crude fell 4.1% to $96.63 a barrel after hitting $100 yesterday on Houthi threats to Saudi ports.
The oil price retreat came despite Trump telling Axios he was "considering a massive attack" against Iran following 13 consecutive nights of US airstrikes. Meanwhile, the ongoing economic decoupling from Russia continued to inflict financial damage, with consumer goods group Reckitt Benckiser warning it will take a £175m post-tax hit from selling its Russian business to Arnest Management due to Kremlin rules.
In a rare bright spot for European exporters, a 10% US tariff on Scotch whisky was lifted on Friday. Scotland’s first minister John Swinney noted that "from today, there are no tariffs on Scotch whisky going to the United States, which is a significant benefit for the Scotch whisky industry."
