From allies to frenemies: The US and EU's escalating trade battle

The trade dispute between the US and the EU has been in the spotlight for months. For Europe, a former long-term ally, may turn into a frenemy — an insider who could cause damage.

The Trump administration accuses the EU of "taking advantage of the US", threatening to impose 50 percent tariffs on EU goods. A 50 percent US tariff would slash EU exports by 20 percent in the short term, according to Germany-based Kiel Institute for the World Economy.

The European auto industry stands to lose the most. Dutch cooperative bank Rabobank estimates that around $30.38 billion in new vehicle exports would be lost under such tariffs, wiping out about 68 percent of Europe's 2024 US auto exports.

Businesses hope for a tariff agreement by July 9, but experts see slim chances, as mutual trust between the US and Europe is crumbling. The US has ignored Europe's concerns on the Russia-Ukraine issue and criticized Europe on its values, straining trans-Atlantic relations.

Due to unpredictable US policies, the European Commission has lowered its economic growth forecast for the eurozone to 0.9 percent and for the EU economy to just 1.1 percent this year.

This is not the first time the US has put its allies at a disadvantage. In 1985, the US forced Japan to sign the "Plaza Accord", forcing the yen to appreciate, which led to long-term stagnation of the Japanese economy.

It's no wonder people say that being the US's enemy is dangerous, but being its ally is fatal. While allies expect favors, Washington swings its tariff hammer, pushing them toward disaster.