Is Trump justified in asking EU to buy more oil and gas from the U.S.?

President-elect Trump threatens tariffs on countries with trade deficits, sparking debate on efficiency and impact on consumers and manufacturers.

U.S. President-elect Donald Trump threatened to impose tariffs on many countries if they do not fulfil certain conditions. In November last year, he said he would impose sweeping tariffs on imports from Canada, China, and Mexico if these countries failed to stem illegal border crossings into the U.S. and the trafficking of drugs — in particular Fentanyl, which is a deadly opioid.

He has also threatened the European Union (EU) with tariffs, as the U.S. runs a trade deficit with the bloc. This means that its imports from the EU are higher than its exports.

Data show that the U.S. had a trade deficit of more than $208.7 billion with the EU at the end of 2023, second only to China with which it had a trade deficit of $279.4 billion. The third on the list is Mexico (trade deficit of $152.4 billion). With Canada, the U.S. had a trade deficit of $67.9 billion. 

Chart 1 shows the U.S.’s trade deficit with select countries at the end of 2023. The other countries which have been threatened with tariffs are also part of the list of countries with which the U.S. runs the highest trade deficits.

It is debatable whether imposition of tariffs is the most efficient way of dealing with this. In 2023, the U.S. imported €40.7 billion worth of motor cars and vehicles from the EU. This was the second biggest commodity in terms of value, from the bloc. If there are higher tariffs on the import of European cars, these cars would become more expensive. This would benefit U.S. car manufacturers.

At the same time, consumers in the U.S. have been importing cheaper goods from countries such as China. They imported over $35 billion worth of smartphones in 2023 from China. If the higher tariffs proposed by Mr. Trump come into force, consumers will need to look for alternatives. This means that they will spend more on these products.

This means manufacturers will benefit, but not consumers.