The European interiors and home living sectors face renewed volatility as former U.S. President Donald Trump threatens a sweeping 50% tariff on EU goods, set to take effect on 1 June. With a fragile trade negotiation underway and a potential €95 billion EU retaliation package on standby, fears of a transatlantic trade war are reigniting across industries.
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Despite the European Union extending a 90-day delay on countermeasures until 14 July and tabling revised trade proposals, U.S. dissatisfaction remains. The EU's offer reportedly includes a €50 billion deal covering liquefied natural gas (LNG) and soybean purchases to narrow the trade deficit, as well as tariff eliminations on cars and industrial goods. Broader cooperation proposals span 'strategic cooperation in energy, artificial intelligence, and digital infrastructure and commitments to international labour rights, environmental standards, and economic security.'
Nevertheless, 'it remains unclear what the US administration actually expects in order to still strike a deal, other than the earlier contemplated unilateral reduction of EU tariffs,' ING analysts noted.
The stark contrast in sectoral tariffs continues to fuel the dispute. For example, EU tariffs on cars stand at 10% compared to 2.5% in the U.S., while the U.S. imposes a 25% tariff on light trucks—substantially higher than the EU's 10%. While the EU recorded a €198.2 billion trade surplus with the U.S. in 2024, the U.S. holds a €109 billion surplus in services, particularly in tech, IP, and finance.
Analysts believe the high-stakes game still leaves room for diplomacy. 'Trump's tariff threats are often a prelude to negotiation,' stated ING, referencing a recent China deal that proved more a delay than a resolution. However, the approach to the EU appears more combative. The ING report highlighted the administration's tone, noting comments such as 'the EU is nastier than China' have characterised the US administration's approach so far.
The EU, for its part, is walking a tightrope, 'signal openness to a deal while preparing for escalation.' Should talks collapse, Brussels may invoke the Anti-Coercion Instrument (ACI), which allows for measures such as 'tighter regulations on US tech firms, delaying licenses or restricting public procurement access and limiting IP rights and investment flows.'
Markets have already reacted. The Euro Stoxx 50 fell nearly 3%, with the auto sector dropping 4–5%. The EUR/USD fell 0.6% before partially recovering, while two-year EUR swap rates dipped 6bp amid expectations of a deeper ECB easing cycle. 'Volatility is back,' ING warned. '50% US tariffs on European products would shave off some 0.6ppt of GDP growth and bring the eurozone economy close to recession territory.'
In conclusion, ING cautioned, 'It doesn't make sense to speculate on the outcome of these trade tensions. Anything is possible, from a potential agreement to further escalation. After a brief lull, brace yourself for the next turbulent chapter.'
For the interiors sector, where transatlantic trade in materials, textiles, finished goods, and machinery is critical, the coming weeks could significantly shape price dynamics, supply chains, and market sentiment.
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