BRUSSELS—The escalating trade war between the U.S. and Europe threatens a commercial relationship that is worth an estimated $9.5 trillion in two-way trade and investment, say American businesses caught in the crossfire .
The American Chamber of Commerce to the European Union, which represents U.S. companies that operate in Europe, said tariffs risk damaging far more than just sales of goods that are directly taxed. They could also harm trans-Atlantic investments, which are more than three times as valuable.
Two-way trade in goods between the U.S. and Europe, including the U.K., hit a record of about $1.3 trillion last year, while total trade in services between the two economies was estimated at more than $750 billion, AmCham EU said in a report published Monday.
But sales by companies that have invested across the Atlantic were far higher, the report said. European affiliate sales in the U.S. were likely above $3.5 trillion and U.S. affiliate sales in Europe were likely more than $4 trillion last year, according to estimates from the report’s authors.
“The damage to the trade flows in goods is bad enough,” AmCham EU Chief Executive Malte Lohan said. “The real risk is that it starts contaminating some of the other links.”
President Trump has largely focused on trade in goods when talking about the U.S.’s trade relationship with Europe. He has repeatedly raised concerns about the U.S. goods trade deficit with the EU, which was $235.6 billion last year, according to the Commerce Department.
Last week, he imposed 25% tariffs on global steel and aluminum imports. He has separately threatened 25% levies on European cars and other goods, sectoral tariffs on products including pharmaceuticals and reciprocal duties in response to European taxes and regulations.
After the EU hit back at the U.S. metals tariffs with plans for levies of up to 50% on a range of American products including whiskey, Trump said he would put 200% tariffs on French Champagne and other EU alcoholic beverages.
Spirits and wine producers on both sides of the Atlantic said tariffs would be deeply damaging to their industries. European wine producers said a 200% tariff could effectively close the U.S. market for their products.
The impact of tit-for-tat tariff threats could be even broader, said Dan Hamilton , a fellow at Johns Hopkins University and one of the authors of the AmCham EU report. The EU could retaliate against the U.S. by taxing services, where the U.S. has a trade surplus. And tariffs could have spillover effects on companies’ trans-Atlantic activities.
More American foreign direct investment goes to Europe than to the rest of the world combined, according to the AmCham EU report. European firms account for almost two-thirds of global foreign direct investment to the U.S.
Tariffs might make it harder for a European company to send parts that it makes in Europe to an affiliate’s U.S. factory, while countertariffs from the EU or another U.S. trading partner could make it harder to export a final product from the U.S., Hamilton said. Policy uncertainty could lead companies to hold back on trans-Atlantic investments.
“The ripple effects of conflict in the trade space will not be confined to trade,” Hamilton said.
Write to Kim Mackrael at kim.mackrael@wsj.com
