Friendship Tax: 30%

Trump gives EU and Mexico one option: move production, or be erased.

Trump’s new round of 30% tariffs on the European Union and Mexico is scheduled to begin August 1. Either companies relocate production to the United States or they pay the price. That’s the deal.

Trump’s Letter to the EU

We have had years to discuss our Trading Relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, Trade Deficits, engendered by your Tariff, and Non-Tariff, Policies, and Trade Barriers,” Trump wrote in the letter to the EU. “Our relationship has been, unfortunately, far from Reciprocal.

Starting on August I. 2025. we will charge The European Union a Tariff of only 30% on EL, products sent into the United States. separate from all Sectoral tariffs. Goods transshipped to evade a higher Tariff” ill be subject to that higher Tariff. Please understand that the 30% number is far less than what is needed to eliminate the Trade Deficit that we have with the EU. As you are aware there will be no tariff if The European union, or companies within the EU decide to build or manufacture product” in the United States and in fact we will do everything possible to get approvals quickly, professionally, and routinely. ln other words. in a matter of weeks.

The European Union will allow complete, open Market access to United States with no tariff being charged to us. If for any reason you try to raise your tariffs to retaliate, then whatever number you choose to raise them by, will be added to the 30 percent we charge.

Trump’s Letter to Mexico

Dear Madum President.
It isa Great honor for me to send you this letter in that it demonstrates the strength and commitment of our Trading Relationship. and the fact that the United States of America has agreed to continue working with Mexico. Despite our strong relationship, you will recall the United States imposed Tariffs on Mexico to deal with our Nation’s Fentanyl I crisis which is caused in part my Mexico’s failure to stop the Cartels who are are made up of the most despicable people who ever walked this earth, from pouring these drugs into our country.

Mexico is helping me secure the border but what Mexico hos done is not enough Mexico still has not stopped the Cartels who are trying to turn all of North America into a Narco-Trafficking Playground. Obviously. I cannot let that happen!

Starting August 1 , 2025 we will charge Mexico a Tariff of 30% on Mexican products sent into the United States, separate from all Sectoral
Tariffs. . Goods transshipped to evade higher tariffs will be subject to that higher tariff. As you are aware there will be no tariff if The European union, or companies within the EU decide to build or manufacture product” in the United States and in fact we will do everything possible to get approvals quickly, professionally, and routinely. ln other words. in a matter of weeks.

If for any reason you try to raise your tariffs to retaliate, then whatever number you choose to raise them by, will be added to the 30 percent we charge.

The Trade Deficit is a major threat to our Economy and, indeed, our National Security.

The letters sent to EU Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum make Trump’s reasoning clear. Trade deficits are unacceptable. For Mexico, the justification is cartel activity. For Europe, it’s economic imbalance. Either way, the logic is blunt.

German automakers are now reassessing their U.S. production strategies. Some Mexican manufacturers are considering moving operations north. The threat of exclusion from the U.S. market is enough to push those decisions forward.

Meanwhile, other countries are adjusting. LNG Canada is shipping to Asia instead of California. The Trans Mountain pipeline, now operating at nearly 900,000 barrels per day, is serving Asian buyers. Talk of reviving Nord Stream II has returned to European policy circles. Trump may have ended one form of dependence, only to push allies into another.

There’s also a broader shift happening. Brazil, Canada, and Mexico are expanding trade with China. Europe is cautiously increasing its energy ties with Russia. When the U.S. becomes unpredictable, partners look elsewhere.

As always, Trump misreads trade deficits. He treats them as losses, not as reflections of investment flows. The U.S. imports capital because it has productive opportunities. Foreign savers finance American investment, not the other way around. Telling them to stop sending money while also demanding they buy American goods is a contradiction.

That contradiction doesn’t seem to matter politically. What matters is that the tariffs are generating revenue. The U.S. Treasury posted a $27 billion surplus in June, helped by tariff income. When you’re borrowing to cover interest payments, any source of cash is welcome.

Of course, this is temporary. Tariffs are a tax, and the cost lands on American consumers. Food will get more expensive. Cars too. Half of U.S. fruit and most vegetables come from Mexico. There’s no easy workaround.

Still, markets are mostly quiet. Maybe they expect a last-minute compromise. Maybe they’ve seen this pattern before. But the August 1 deadline is approaching, and the White House shows no sign of backing down.

This is what the end of free trade looks like. Not a collapse, but a gradual shift. Production moves. Supply chains reroute. Prices rise. And the rest of the world finds ways to move on without U.S. leadership.

Related Posts:

JUL 10, 2025: August 1 Will Break Something

JUL 08, 2025: Taxed Like a Threat, Treated Like a Need

MAY 29, 2025: One Judge vs the Tariff State

MAY 28, 2025: The Fed Is Paralyzed. Tariffs Aren’t.

MAY 28, 2025: When the Policy Is the Risk

MAY 23, 2025: Trade by Tantrum