As the fallout from President Trump’s rewiring of global trade sets in across Europe, governments are putting in place billions of euros’ worth of “tariff shields” to protect their economies, companies and workers from uncertainty and the growing prospect of a recession.
Germany, Italy, Portugal and Spain announced more than 50 billion euros’ worth of financial support this week as businesses paused exports to the United States, warned of a hit to their finances and reckoned with putting employees on furlough. More European countries are expected to follow.
Mr. Trump’s 90-day suspension of U.S. tariffs this week raised hopes in Europe for negotiations, but the damage has already been done. A severe rout in financial markets has compounded the problem, spurring governments to find lifelines at a time when their budgets are being squeezed by higher military spending as Mr. Trump pivots toward Russia from Ukraine.
The tariff pause is “fragile,” President Emmanuel Macron of France warned Friday, because 25 percent tariffs on steel, aluminum and autos and 10 percent tariffs on all other products are still in place, representing €52 billion in levies for the European Union.
“Europe must continue to work on all necessary countermeasures and mobilize all available levers to protect itself,” he said in a post on X. He added that French entrepreneurs and industrialists told him that their businesses were already being hit “right to the heart” by Mr. Trump’s tariffs.
The whipsaw of the tariff announcements has already led to lower growth forecasts. France, Germany, Italy and Spain — Europe’s biggest economies — downgraded their economic outlooks this week, and Moody’s ratings agency said in a new analysis that the tariffs had raised the risk of a recession in Europe.
In Spain, which exports 23 billion euros’ worth of products to the United States, including olive oil and chemicals, Prime Minister Pedro Sánchez’s government announced a €14 billion support package for companies affected by the trade war.
Mr. Sánchez met with President Xi Jinping of China on Friday to strengthen trade ties, and won a pledge from Beijing to buy more Spanish pork as tariff barriers go up in the United States. Spain’s “trade response and recovery plan” will include low-cost credit for businesses that are hit by reduced orders from American buyers or run into liquidity problems. Spain will also earmark €2 billion to insure risks related to companies’ exports.
There could be a human toll, too: Spain will also revive a partial furlough system modeled on the one used during the Covid pandemic to shield workers if companies are forced to reduce production.
“The world as we knew it has changed, we have to adapt and react,” Prime Minister Luís Montenegro of Portugal said Thursday at a news briefing.
His cabinet unveiled loans and other support measures worth more than €10 billion on Thursday to shore up the economy and help the country’s 70,000 exporters, as well as foreign investors relocating their businesses to Portugal. The package includes financing for capital and investment, and aid, grants and credit insurance for exporters.
In Italy, Prime Minister Giorgia Meloni plans to visit Washington next week to talk to Mr. Trump about tariffs in a bid to avert re-escalation. The United States is a major market for Italian machinery, pharmaceuticals and cars, not to mention foods like Parmesan cheese and leather and luxury goods.
Ms. Meloni has called the tariffs “wrong” and said Wednesday that she planned to repurpose up to €25 billion that Italy received from the European Union’s post-pandemic recovery plan to help offset pain from the tariff war.
She said her government had identified about €14 billion that could be redirected to “support employment and increase productivity.” An additional €11 billion from another E.U. fund intended for economic development could also be repurposed, she added.
Mr. Trump’s tariffs are adding another challenge to attempts by Germany’s new government to revive its economy, Europe’s biggest. The move risks raising prices for U.S. consumers on well-known brands still fully “made in Germany,” from Porsche and Jägermeister to Fischer Amps and Harry’s razors.
A new coalition government, headed by the expected next chancellor, Friedrich Merz, this week announced the Germany Fund, which is intended to strengthen the economy. Germany was already teetering on its third straight year of recession before Mr. Trump’s tariffs, as soaring energy prices caused by Russia’s war in Ukraine hit its manufacturing base.
The fund would be seeded with €10 billion of public money, with hopes of raising it to €100 billion from private investors, to support small and midsize businesses that form the backbone of the economy. The government is also pledging a corporate tax break to encourage investment and energy price reductions.
After Mr. Trump reversed himself on retaliatory tariffs Wednesday, Mr. Merz said Europe should stay united to push for a favorable deal.
“Europeans are determined to defend ourselves and this example shows that unity helps most of all,” he said on German television. “Let’s all set tariffs of 0 percent on trans-Atlantic trade, and then the problem will be solved.”