On July 12, 2025, President Donald Trump announced plans to impose 30% tariffs on nearly all imports from the European Union and Mexico, with the measures scheduled to take effect on August 1. The announcement, made via Truth Social, marks one of the most aggressive trade moves in recent history and has triggered global concern, from diplomatic circles to financial markets.
What’s Behind the Tariff Push?
According to Trump, the decision is rooted in a need to:
- Address long-standing trade imbalances
- Pressure Mexico on issues like illegal immigration and drug trafficking
- Reassert U.S. economic strength against what he claims are “unfair” trading practices
The move echoes into many of Trump’s prior trade tactics, using tariffs as leverage in broader negotiations with foreign partners. “The United States cannot continue to be taken advantage of,” Trump stated, reinforcing his familiar “America First” message.
How the EU and Mexico Are Responding
Reactions from global leaders came swiftly:
- EU Commission President Ursula von der Leyen called for urgent negotiations and warned that the EU is ready to implement countermeasures if tariffs are enacted.
- French President Emmanuel Macron called on the bloc to defend European interests “resolutely.”
- EU Trade Commissioner Maroš Šefčovič noted that a 30% tariff could “practically prohibit” transatlantic trade, highlighting that the U.S.–EU trade relationship amounts to over €4 billion in daily commerce.
- Mexico’s President Claudia Sheinbaum labeled the move “unfair” but said her administration remains open to dialogue.
While both the EU and Mexico expressed interest in negotiating, each is preparing proportional responses should diplomacy fail.
Markets React: A Dip, But No Panic
Despite the harsh rhetoric, financial markets have remained relatively calm, at least for now.
The euro slipped to a three-week low, trading around $1.1676 following the announcement.
The Mexican peso also weakened, hitting 18.68 pesos per dollar.
Other currencies like the British pound, Australian dollar, and New Zealand dollar saw minor declines.
Meanwhile, Bitcoin surged past $120,000, boosted by growing optimism around U.S. crypto regulation.
Investors appear cautious but not alarmed. Many attribute the calm to what’s being called the “TACO effect”, short for Trump Always Chickens Out, a belief that his threats are more about gaining leverage than enforcing policy.
According to a Reuters market report, most traders are now more focused on upcoming U.S. inflation data and China’s GDP figures than on immediate tariff consequences.
From now until July 31, intense negotiations are expected behind the scenes as the U.S., EU, and Mexico attempt to avoid a trade clash. If no agreement is reached, the proposed 30% tariffs are set to take effect on August 1. In response, both the EU and Mexico may introduce retaliatory tariffs shortly after that date, potentially escalating tensions and impacting global trade flows.
The next two weeks will be critical. If no deals are reached, retaliatory tariffs from the EU could reach €21 billion, possibly extending to €72 billion, according to multiple reports.
What It Means for the Economy
If implemented, these tariffs could have a significant ripple effect:
Increased costs for U.S. importers and consumers
Supply chain disruptions in key sectors like automotive, agriculture, and consumer electronics
A possible slowdown in U.S.–EU and U.S.–Mexico trade relations
Rising inflation pressure, just as central banks aim to stabilize economies post-pandemic
Though markets are holding steady for now, the real impact will depend on how negotiations unfold before August.
Final Thoughts
Trump’s latest tariff threat is both bold and familiar. While it has rattled policymakers in Brussels and Mexico City, markets seem to believe this is part of a broader strategy to pressure partners ahead of a deal, not the start of a full-scale trade war.
But with the deadline fast approaching, the global trade community is watching closely. The next move will reveal whether this is all talk, or a shift with real, lasting consequences.