Trump's trade war: What could be the consequences for French economy?

The spectre of a transatlantic trade war looms again as US President Donald Trump has threatened to impose sweeping tariffs of up to 25% on all EU goods.

The potential move could send shockwaves through the French economy. In response, Brussels has signalled that it will be ready to retaliate.

The US is France's fourth-largest customer and fifth-largest supplier in 2023, according to Natixis, a major French banking group.

Aeronautics, pharmaceuticals, wines and spirits together account for more than a third of French exports to the US, meaning these sectors are particularly vulnerable.

But the French spirits industry, valued at €3.9 billion in annual exports, is bracing for the worst.

Already between 2019 and 2021, a similar tariff war saw Trump impose 25% duties on French wines, later expanding the policy to cognac and other high-end liquors.

The results were catastrophic for the industry, with a 40% plunge in exports and a net loss of €500 million, according to industry figures.

Pharmaceuticals, the second-largest category of French exports to the US, could also be at risk.

Should the US move forward with tariffs, French pharmaceutical firms could face difficult decisions about whether to shift production elsewhere.

“The steel sector is already weakened, as is the automobile sector with the transition to electric vehicles," said Christophe Blot, an economist at the OFCE, a French economic think tank.

"Meanwhile, industries heavily exposed to the US market — such as luxury goods and pharmaceuticals are particularly vulnerable,” Blot added.

The EU has made clear that it will respond if Trump follows through with his threats. But economists warn that retorsion measures could backfire, penalising European consumers.

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