Likelihood of tariff implementation 

With the wave of tariff announcements, a key question arises: What is the primary objective of these tariffs, and how likely are they to be enforced? The administration has consistently pointed to concerns over the trade deficit and non-reciprocal tariffs in key sectors. According to the U.S. Bureau of Economic Analysis, the trade deficit increased by 17% year-over-year in 2024. 

The announced tariffs generally fall into three categories: 
  • Negotiation tactics: Some tariffs serve primarily as leverage to bring trading partners to the negotiating table rather than as actual trade restrictions. The 25% tariff on Canada and Mexico aims to initiate broader discussions beyond trade, including geopolitical concerns.
  • Reciprocal tariffs and trade deficit adjustments: These tariffs align with Trump’s Fair and Reciprocal Trade Plan, addressing imbalances where U.S. exports face higher tariffs than imports from trading partners. For instance, the EU imposes a 10% tariff on U.S. automobiles, while the U.S. levies only 2.5% on EU vehicles.
  • Domestic industry protections: Some tariffs explicitly aim to shield U.S. industries from foreign competition, particularly in manufacturing. The steel and aluminium tariffs exemplify this approach, reinforcing domestic production and reducing import reliance.

Given the current policy direction, the latter two categories – reciprocal tariffs and industry protections – are more likely to result in tariffs or trade negotiations that could affect Swedish businesses. 

Monitoring impacts of EU trade negotiations 

The trade deficit between the U.S. and Sweden reached nearly USD 10 billion in 2024, according to the U.S. Census Bureau. This deficit adds weight to the administration’s push to bring the EU into trade negotiations. 

However, a broader perspective is necessary. The U.S. has one of the world’s largest consumer economies and has significantly outsourced manufacturing since the 1970s. In many sectors, meeting domestic demand through local production alone is not feasible in the short term, let alone ensuring sufficient supply for exports. 

Broader factors influencing trade talks 

While the administration highlights specific tariff imbalances – such as the 7.5% gap in automotive tariffs favouring the EU – the likely approach will be a broader dialogue on trade between the U.S., Sweden, and the EU. Other factors, including value-added tax (VAT) structures, the competitiveness of European products, and additional trade barriers, will also come into play. 

Though the situation may mirror the high-tariff negotiations with Canada and Mexico, the long-term outcome remains uncertain. While Trump’s strategy with North American trade focused on renegotiating the USMCA and reinforcing migration policies, the rationale behind tariffs targeting Sweden and the EU is less defined, making their implementation and resolution harder to predict. 

Federal funding pause for cleantech solutions 

On 20 January, several executive orders were announced, effectively pausing various federal funding initiatives for review. The aim is to ensure compliance with the new administration’s goals. 

The most important pause is the Unleashing American Energy executive order, which has paused grants and funding related to cleantech under the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). However, general funding for contracts, such as highway and road construction, is not expected to be affected. 

For Swedish companies with federal contracts for cleantech solutions impacted by this pause, obligated funds – those already awarded and contractually committed – will face a temporary 90-day suspension of disbursal. While these funds are expected to remain intact in the long run, programmes established under the IRA and IIJA that have not yet been awarded may see further efforts to reallocate their funding. Full repeal of these funds is unlikely, but it is possible that Congress may target specific programmes like the EV consumer tax credit. 

It is expected that newly appointed administrative heads will release guidelines on implementing these programmes, such as the recent Department of Transportation memo that prioritises funding areas with high birth and marriage rates.  

What to look out for this week 

The 30-day pause on tariffs for Mexico and Canada is set to expire as February comes to a close. It will be important to watch whether the administration negotiates an extension or adjusts the tariffs. This decision will serve as a key indicator of the administration’s broader objectives behind the tariff strategy. 

Get in touch 

Business Sweden has extensive experience conducting tariff scenario analyses, localisation evaluations, and developing potential supplier lists. If you need support in evaluating your supply chain and the possible impacts of these tariffs on your U.S. operations, please contact Johan Karlberg.