How tariffs and trade regulations impact European businesses

Shifting global tariffs and changing trade regulations are creating planning challenges for many businesses across the world. According to a recent survey, 80% of European companies state sudden changes to duties and tariffs as a top geopolitical risk to supply chains in 2025, while 64% are also concerned that low political stability leading to sudden changes in regulatory approaches and policies will present a risk to supply chains.

Due to changes in the international trade environment, 92% of European businesses expect increased import and export costs. Despite the volatility, 70% of European businesses are confident that they can respond to sudden changes in conditions within 72 hours. Likewise, the expectation of global growth in demand went from 28% the previous year to 39% in 2025.

The historic impact of tariffs on global trade

The regulatory environment we are seeing today is not a novelty – tariffs have been a part of global trade and international relations for many years and have given economists plenty of material to study.

“In the past, some countries have justified the use of tariffs as a means to protect domestic industry. However, such measures can lead to higher prices for end products, weighing on consumer demand,” says Calum Fox, Economist at Maersk.

For instance, in the 1960s, the European Economic Community imposed tariffs on American chicken, ultimately leading to a drop in US chicken exports by about 30 percent. The US then imposed reciprocal tariffs on various European imports, including a 25% tariff on imported light trucks. While these moves protected local poultry farmers, they triggered a trade conflict and reduced market competition.

Similarly, in the 1980s, after Japanese-produced cars started gaining market share among American consumers, the US imposed first a quota, and later tariffs, on vehicles imported from Japan. This meant that domestic car producers could raise their prices without fear of foreign competitors.

To further increase car prices, US manufacturers also lowered production, ultimately leading to a decreased workforce.

Elsewhere, following political tensions in 2019, India imposed restrictions on refined palm oil imports from Malaysia, a key supplier. This led to a sharp drop in Malaysian exports and forced suppliers to redirect trade flows to other markets, for example China. Indian importers turned to Indonesia instead, shifting regional supply chains and pricing dynamics. While the move addressed short-term political objectives, it created uncertainty for buyers and disrupted long-established trade relationships.

How tariffs affect companies of different sizes

While tariffs are applied uniformly to imported goods, they can have varying impacts on companies depending on their size, resources, and operational flexibility. The ability of a company to adapt to these changes can differ significantly between large multinational corporations and smaller businesses.

Larger companies may have the resources and capacity to shift their operations in response to tariffs. Take for example the tariffs imposed in the 80s on Japanese car makers – the affected large companies were able to respond to the tariffs by moving production to the US, avoiding tariffs altogether. In contrast, smaller businesses may lack the resources and ability to make such significant operational changes in response to immediate regulatory changes. Likewise, they might be unable to absorb increased costs, making them more vulnerable to the negative effects of tariffs.

Small and medium-sized businesses face another challenge in complexity of compliance. Determining proper tariff codes, compiling accurate paperwork, applying for exemptions or quotas all require resources and knowledge smaller businesses may not be able to access.

“Large corporations often have more capacity to absorb these costs within their margins, while SMEs may not have the capital reserves to do so as easily, making them more likely to pass on some of this cost to the final consumer,” adds Fox.

In addition to tariff barriers, non-tariff trade barriers such as trade regulations add to the administrative burden of businesses and the costs of goods sold. Increasingly, new regulations require customs authorities to enforce compliance with product rules at the border, with the need for businesses to evidence compliance before moving the goods with their customs declarations.

“There are the US and EU multi-tier rules on forced labour, and rules in Europe on packaging, deforestation, or on importing CO2 emissions-heavy goods, to name but a few. In addition to tariffs, these trade regulations add to the quantity of trade barriers businesses have to comply with, increasing the time and costs of conducting international trade. Trade compliance is becoming a license to play - but it can also be an opportunity and a market differentiator,” adds Lars Karlsson, Maersk’s Head of Global Trade and Customs Consultancy.

What tariffs mean for European businesses

The full impact of tariffs on European businesses will only be visible in the long run, as global tariffs get further defined on an ongoing basis.

“Beyond the exact design of the tariffs themselves, the impact on EU businesses also depends on how heavily a given business relies on the market imposing the tariffs,” explains Fox.

In Germany, the third biggest manufacturing country in the world, data shows that 80% of manufacturing and information technology companies expect a negative impact on the German economy following potential tariffs imposed by the US.

But the impact of tariffs is not only direct. Tariffs and regulatory changes can have an impact on supply chains as companies in certain industries may decide to advance or pause their cargo, changing the usual pattern of cargo flows and causing additional disruption.

How European businesses can prepare for potential tariffs

As the world continues to see an increase in tariffs and legislation activity impacting global trade, it is crucial to stay up to date on the latest developments. To find the latest information on changes in 2025, and guidance on where to find support and answers, please visit our global tariffs page.

The exact preparation strategy will depend on the actual design of the tariffs. However, to proactively mitigate the impact of potential tariffs, European businesses can take the following steps:

• Conduct a risk assessment – Evaluate all elements of your supply chain to identify vulnerabilities and potential impact that tariffs can have on your operations.
• Look into diversifying suppliers and/or markets – Identify how feasible it is for your business to reduce reliance on a single country or supplier by exploring alternative sources. Conduct a market analysis to evaluate opportunities in new and emerging markets.
• Review and adjust pricing strategies – Analyse the impact of tariffs on manufacturing, transportation, and customs costs, and consider making pricing adjustments to maintain competitiveness.
• Stay informed on tariff and trade policies – Keeping up to date with the changes in trade regulations and tariffs is the first step in making proactive adjustments to business strategies.

“Finally, upgrade your company’s customs policy and focus on compliance with tariff and trade regulations,” continues Karlsson, “it is not only the costs of tariffs that will cause an impact, but many customs authorities have increased border checks and post-clearance audits. It is vital for companies to be meticulous about adhering to trade regulations. Lack of compliance can either delay or stop your products or catch you out later. Therefore, make sure your company is audit ready. Own your customs data or get a partner that can do it for you, and make sure that you have solutions that can handle multiple regulations for multiple markets”.

By leveraging the expertise of our consultants in Europe, you can navigate the complex web of regulations, mitigate risks, streamline your supply chains and capitalise on the opportunities presented by the European market. For more information, visit our Trade and Customs Consulting page.