The date was circled in red on the calendars of every European commercial department. July 9, 2025, was supposed to mark the reinstatement of Donald Trump’s "reciprocal" tariffs, after a three-month suspension. Yet again, the deadline has been pushed back this time to August 1. This delay illustrates the paradox of Trump’s trade policy: while it brings short-term relief, it fuels mounting anxiety, leaving businesses to navigate a fog of uncertainty that may prove more paralyzing than the tariffs themselves.

The year 2025 has been defined by extreme market volatility, directly tied to Trump’s tariff announcements. April 2 dubbed “Liberation Day” will long be remembered: U.S. markets lost $3.1 trillion in a single session. The Dow Jones dropped 4%, the S&P 500 fell 4.8%, and the Nasdaq plummeted 6%, marking the worst day since the pandemic.

Just days later, the announcement of a 90-day negotiation window sparked the opposite reaction: the Dow surged 8%, the S&P 500 jumped 9.5%, and the Nasdaq soared 12%. In May, a framework agreement with China cutting tariffs from 145% to 30% pushed all major indexes up by at least 2.8%.

This financial roller coaster reflects investor nervousness over an unpredictable trade policy, where every announcement can swing billions in market value.

Inflation on the rise again

The economic impact has been swift. U.S. inflation rose to 2.7% in June 2025, marking the second consecutive month of increase. This resurgence aligns with economic theory: nearly half of U.S. imports are intermediate goods used to manufacture finished products.

Doug Irwin, professor at Dartmouth College, points out: “If you look at a Boeing aircraft or a car made in the U.S., it’s really international in origin.” Companies are passing these additional costs on to consumers. A 2019 study from the Federal Reserve Bank of New York had already found a “full pass-through” of Trump’s 2018 tariffs to domestic prices.

Federal Reserve Chair Jerome Powell acknowledged on June 18 that he expects “more” inflation from goods, confirming the tangible impact of current tariff policies.

Europe in the crosshairs

The European Union is now squarely in the line of fire. Trump has announced 30% tariffs on EU goods starting August 1, prompting a swift reaction from Brussels. EU Trade Commissioner Maros Sefcovic expressed “regret and disappointment,” while maintaining hope for a negotiated solution.

Germany appears to be the most exposed. With nearly a quarter of its exports bound for the U.S., think tank Bruegel estimates the potential GDP impact at 0.4%. Andrew Hunter of Moody’s notes, “Germany stands out as the major European economy likely to be hit hardest.”

Ireland presents an even riskier profile. Over half its exports go to the U.S., and Trump is threatening 200% tariffs on pharmaceuticals a sector representing 55% of Irish exports. Bruegel estimates a cumulative 3% GDP loss for Ireland by 2028.

European countermeasures

The EU has prepared retaliatory tariffs targeting €72 billion worth of U.S. imports, including aerospace, machinery, automobiles, chemicals, and even bourbon. However, Sylvain Broyer of S&P Global Ratings warns, “The EU relies heavily on U.S. services, especially in tech, payments, and consulting,” making tit-for-tat measures more complex.

The “TACO” phenomenon: investor desensitization

A revealing trend has emerged: the rise of the “TACO” phenomenon Trump Always Chickens Out. Unlike the April panic, recent announcements have left Wall Street unfazed. Bret Kenwell of eToro explains this “headline fatigue” as a growing belief that Trump’s trade statements are more negotiating tactics than firm policies.

When Trump doubled steel tariffs in June, markets barely flinched. Yet this desensitization hides a stark reality: despite these tactical retreats, the effective tariff rate has reached 20.6% the highest since 1910, according to the Yale Budget Lab.

Uncertainty freezes investment

Beyond specific sectors, it’s uncertainty itself that’s becoming the biggest hurdle. The National Federation of Independent Business reports that the share of U.S. SMEs planning investments has dropped to its lowest since April 2020. “The economy will continue to struggle until the major sources of uncertainty are resolved. It’s hard to steer a ship in the fog,” the group notes.

This volatility is forcing companies to rethink their operational models. In such an environment, flexible financing tools and currency risk management strategies are proving essential to navigate this new, structurally uncertain landscape.

Negotiation or escalation?

Despite rising tensions, some economists remain optimistic. Joerg Kraemer of Commerzbank believes that “both parties [U.S. and EU] will reach a compromise,” with a likely average EU tariff rate of around 15%. Salomon Fiedler of Berenberg notes that “Trump has always started with extreme positions, then struck deals.” The fact that he’s threatening action for August 1 rather than enacting it immediately suggests he’s still angling for a deal.

Analysts at BNP Paribas expect “agreements to be reached before August 1 to limit further tariff hikes,” though they caution that the risk of reciprocal escalation remains high.

The art of navigating the unpredictable

The coming weeks will be decisive. They will reveal whether Trump’s approach can lead to durable trade agreements or trigger a new fragmentation of global commerce. For European businesses, the challenge goes beyond cost management: their adaptability to a fundamentally unpredictable environment is now under scrutiny.

In this new reality, business leaders must rethink their strategies. The days of planning based on stable tariff structures are over. The new normal demands constant agility and sophisticated financial tools to survive in this structurally volatile landscape. The delay until August 1 offers a brief reprieve but it must not obscure the core truth: the era of predictable trade is gone.

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