The US tariff policy on “derivative” goods threatens to set off a domino rally in reverse, deconstructing the complex and efficient supply chains that underpin European manufacturing. By penalizing finished goods, the policy creates powerful incentives for companies to radically alter where they source materials and where they assemble products.
Current European supply chains are built for efficiency. A German carmaker might use steel from a Swedish mill, components from an Italian supplier, and electronics from an Irish firm. The US policy disrupts this intricate web by making the final assembled product a tariff liability.
To avoid the tariffs, a manufacturer might be forced to consider costly and inefficient alternatives. They could try to source verifiably non-Chinese steel for every component, a logistical nightmare. Or they might move final assembly for US-bound products outside of the EU to a country with a different trade relationship with the US.
This could lead to a gradual unraveling of integrated European supply chains. The penalty on the final product creates a backward pressure that could break the links between suppliers and assemblers. It punishes the very integration that has made European manufacturing competitive.
This potential deconstruction is a long-term strategic threat. While the immediate costs are high, the greater danger is that the US policy will force a permanent and damaging reorganization of the continent’s industrial base, leaving it less efficient and more fragmented.