Impact of US Tariffs on EU Agriculture: Sectoral Impacts and Strategic Responses

The Nature and Scope of the New US-EU Trade Agreement

A significant new framework trade agreement has been established between the US and the EU, fundamentally altering the tariff landscape between the two economic powerhouses that account for almost a third of global trade. However, this agreement can be viewed less as a comprehensive, long-term treaty and more as a fragile political truce designed to de-escalate a potentially damaging trade war. The cornerstone of this deal is the introduction of a single, all-inclusive tariff ceiling of 15% imposed by the US on the majority of goods imported from the EU, which took effect on August 1, 2025.

The EU's acceptance of this tariff was largely a defensive maneuver, made under the considerable pressure of avoiding threatened US tariffs of 30% or higher. While the agreement includes several crucial exemptions and special provisions for strategic products, the 15% baseline remains the dominant feature, impacting a wide array of industries, including agriculture. In a reciprocal move, the EU has agreed to eliminate its remaining low-level duties on industrial goods from the US and to provide improved market access for a limited quantity of American products, including certain agricultural goods like soybean oil and processed foods, as well as specific fishery products, all subject to tariff rate quotas (TRQs).

This new tariff framework has profound implications across many industries, but it is particularly critical for the EU's agricultural sector. According to Eurostat, in 2024, agricultural exports constituted 9% of the EU's total trade in goods, highlighting the sector's economic importance. Within this vital industry, the US holds a position of paramount importance. As the EU's second-largest agricultural trading partner after the United Kingdom (UK), the US market is the destination for 13% of all EU agricultural exports, making any change in trade terms a matter of significant concern.

The Significance and Asymmetry of US-EU Agricultural Trade

The agricultural and related products trade relationship between the EU and the US is substantial, yet notably asymmetrical, positioning the US as a more critical market for the EU than the reverse. The EU maintains a significant trade surplus with the US in the food and agriculture sector. According to the United States Department of Agriculture (USDA), in 2024, EU exports in this category to the US amounted to approximately USD 42 billion, whereas imports from the US were valued at only USD 14.8 billion, resulting in a trade surplus of USD 27 billion for the EU. As illustrated in Figure 1, the EU trade surplus has increased over the past ten years.

Figure 1. EU Agriculture and Related Exports to and Imports from the US 2014-2024

This imbalance is largely defined by the composition of the goods traded. As illustrated in Figure 2, the EU primarily exports a diverse range of high-value, processed food products to the US market. Key export categories include wine and related products, distilled spirits, essential oils, dairy products (particularly cheeses), and various baked and processed consumer goods. These items often command premium prices, reflecting their value-added nature. In contrast, US agricultural exports to the EU are composed more of commodities and intermediary products. Soybeans and tree nuts (such as almonds and pistachios) constitute a significant portion of these exports, alongside other raw materials like forest products and ethanol.

Figure 2. Top 10 Products Exported From the EU to the US 2024

Figure 3. Top 10 Products Exported From the US to the EU 2024

From a strategic perspective, the US market holds greater importance for EU agricultural exporters. As illustrated in Figure 3, the US is the EU's second-largest export destination for food and agricultural products, accounting for 13% of the bloc's total exports in this sector. Conversely, the EU is only the fourth-largest export market for US agricultural goods, representing just 8% of its total. This disparity highlights the EU's greater reliance on the US as a key source of export revenue. While the EU is a significant supplier to the US - its third-largest import partner for agricultural goods accounting for around 16% of total imports - the challenge for EU exporters lies in the difficulty of replacing the US market, which is unique in its size and willingness to pay a premium for high-value European products.

Figure 4. Top 5 Export Partners by Share for the EU 2024

Figure 5. Top 5 Export Partners by Share for the US 2024

Potential Impact of Tariffs on Key EU Agricultural Sectors

It is crucial to note that the 15% tariff levied on the EU is not an isolated measure but part of a wider US trade strategy that has seen similar reciprocal tariffs imposed on numerous other countries. This global application has a nuanced effect on the competitiveness of EU agricultural products. On one hand, because other major trading partners face similar trade barriers, the direct competitive disadvantage for the EU is somewhat muted as its rivals are not gaining a significant tariff-based advantage. On the other hand, this broad-based tariff regime will almost certainly lead to higher prices for a wide range of imported goods for US consumers. This overall price inflation could suppress consumer demand for non-essential or premium imported products, which would still have a significant negative impact on EU exports, regardless of the relative tariffs on other nations.

The imposition of a 15% tariff by the US is expected to have a varied and significant impact across the EU's diverse agricultural export sectors. The primary determinants of this impact will be a sector's reliance on the US market and the price elasticity of its products - that is, the extent to which US demand will fall as prices rise. Furthermore, this tariff does not exist in a vacuum; its effects are compounded by a devalued US dollar and higher energy costs for EU producers, creating a double hit on their competitiveness. Based on USDA trade values and product characteristics, the impact can be categorized into three distinct tiers of vulnerability.

Medium-to-High Impact Sectors:

This category includes sectors with high export values to the US where products are potentially substitutable, making them sensitive to price increases.

• Consumer Foods: This sector, with exports of USD 5.87 billion in 2024, has seen explosive growth of nearly 150% over the last decade. While some specialty items may be resilient, many products like pasta, baked goods, and condiments could be vulnerable. The US has a strong domestic food processing industry, and a 15% price increase could incentivize US consumers and retailers to switch to locally produced alternatives.
• Dairy Products: Valued at USD 2.90 billion in 2024, this sector faces a mixed impact. High-end, geographically protected cheeses from Italy and France may prove relatively price inelastic due to strong brand loyalty and a lack of direct substitutes. However, more commoditized dairy products like butter could be significantly affected, as US importers could source from other countries like New Zealand to avoid the tariff. Countries like Ireland, with a heavy reliance on dairy and beef exports to the US, are particularly exposed. 
• Wine, Spirits & Beer: As the largest single export category at USD 10.30 billion in 2024, any disruption here is significant. Premium wines and spirits with protected designations of origin (PDO) may retain their market share. However, the broader, more price-sensitive segment of the market could see a notable decline in demand as US consumers opt for domestic wines or spirits from other regions not subject to the tariff

Low-to-Medium Impact Sectors:

These sectors have significant trade value but may be partially insulated by factors like low price elasticity or limited alternative suppliers.

• Essential Oils: A major export category valued at USD 4.37 billion in 2024, these are often highly specialized intermediate products used in the food, beverage, and cosmetics industries. While a tariff will increase costs for US manufacturers, the unique specifications and quality of these oils may make it difficult to find immediate substitutes, forcing US importers to absorb a portion of the cost.
• Fruit & Vegetables (Processed): With exports of USD 2.71 billion, this sector's vulnerability depends on the product. Staple items that supplement US domestic production, such as French fries, may see limited impact. However, products that compete more directly on price, such as processed mushrooms or canned goods, are more likely to be negatively affected.

Low Impact Sectors:

These sectors are least likely to be affected due to the highly specialized nature of their products and the lack of viable substitutes in the US market.

• Oil and Oilseeds (Olive Oil): This category, which includes a significant amount of olive oil, reached USD 2.90 billion in 2024. The EU dominates global production of premium and extra-virgin olive oil. As US domestic production is minimal and consumer preference for European olive oil is strong, demand is relatively price inelastic. US consumers are likely to bear the brunt of the price increase, with minimal reduction in export volumes for the EU.

The Socio-Economic and Human Cost

The consequences extend beyond corporate balance sheets, raising concerns about the socio-economic stability of the agricultural workforce. Beyond the direct economic impact on producers, organizations like the European Federation of Food, Agriculture and Tourism Trade Unions (EFFAT) have sounded the alarm over the human cost. There are significant concerns that the financial pressure from tariffs will ultimately be passed on to agri-food workers through downward pressure on wages, deteriorating working conditions, and potential job losses in the most affected regions and sectors.

Strategic Responses for EU Exporters and Policymakers

In response to the new tariff environment, European food and agriculture companies must adopt a range of strategic measures to mitigate financial impact and maintain their competitive position in the crucial US market. The optimal strategy will vary by sector and company, depending on product characteristics, market power, and corporate structure. Concurrently, EU policymakers are pursuing a multi-pronged strategy at the diplomatic level.

Corporate Strategies:

• Price and Margin Adjustments: Companies will either have to pass costs to consumers for inelastic goods or absorb costs for price-sensitive products. For products with inelastic demand, such as high-end olive oils and wines or specialty cheeses, exporters may choose to maintain their prices. In this scenario, the cost of the tariff is passed through the value chain to US importers and, ultimately, consumers. This strategy is most effective for unique, premium products with strong brand loyalty and few direct substitutes. For more price-sensitive products in competitive categories like consumer foods and standard wines, companies may need to absorb a portion of the tariff by lowering their own prices. This approach, while eroding profit margins, can help preserve market share. Cost-sharing agreements with US importers could also be explored.
• Market and Supply Chain Diversification: This includes re-focusing on non-US markets or, for larger multinationals, redesigning supply chains. For companies dealing in commodity-type products with thin margins where the US is not a primary market, a strategic withdrawal may be the most prudent option. Resources could then be reallocated to other markets, though this carries the risk of creating price pressure elsewhere. Large corporations with production facilities in multiple countries could also redesign their supply chains to serve the US market from a non-EU country that is not subject to the tariffs. This would allow them to bypass the new levy, although it requires significant logistical and operational adjustments.
• Long-Term Structural Changes: A more radical and long-term strategy is to circumvent the tariffs by establishing or expanding production facilities within the US. This aligns with a key objective of the US tariff policy, to encourage domestic investment. For sectors like processed fruits and vegetables or consumer foods, this could be a viable, albeit capital-intensive, path to securing long-term access to the US market. This move requires extensive financial commitment and several years to establish new facilities and supply chains.

EU Policy-Level Responses

At a policy level, the EU's response is focused on dialogue, monitoring, and maintaining unity. A primary strategy is the continued lobbying of Washington to expand the list of "strategic products" exempted from tariffs, with a particular focus on the high-value beverage sector. The EU is also closely monitoring the implementation of the deal and reserves the right to enact retaliatory measures should the agreement falter or if the US imposes further duties. However, this strategy is complicated by the need to maintain a unified front among member states, whose economic priorities can differ, for instance, between Germany's focus on the automotive industry and the agricultural concerns of France, Italy, and Spain.

Conclusion

The new 15% US tariff on EU goods represents a significant challenge to the European agricultural sector, disrupting a deeply interconnected and financially important trade relationship. The asymmetrical nature of this relationship, with the EU's heavy reliance on the US as a high-value export market, means the bloc and its producers are disproportionately exposed to the negative impacts of this new trade barrier. Navigating this challenge will require a dual approach. On the corporate side, companies must strategically adapt through careful price management, market diversification, and potentially long-term investment in the US, while at the policy level, continued diplomatic engagement and a unified EU stance will be critical. The path forward is full of uncertainty, demanding resilience and strategic foresight from one of Europe's most vital economic sectors.