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Economy

EU's response to U.S. tariffs and the potential for a trade conflict

Sunday 06 April 2025 - 10:30

By: Zahouani Ilham

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The European Union (EU) is preparing to implement targeted countermeasures against U.S. President Donald Trump's tariffs, which could affect up to $28 billion worth of U.S. imports, ranging from dental floss to diamonds. This step follows actions taken by China and Canada, marking an early escalation of what some fear could develop into a global trade war. Such a conflict could lead to higher costs for billions of consumers and risk pushing economies worldwide into recession.

The EU faces 25% tariffs on steel and aluminum, as well as tariffs on cars and reciprocal duties of 20% on almost all other goods starting Wednesday. These tariffs affect about 70% of the EU's exports to the U.S., which totaled €532 billion ($585 billion) in 2024. Additional duties on copper, pharmaceuticals, semiconductors, and timber are expected to follow.

The European Commission, responsible for EU trade policy, is planning to propose a list of U.S. goods to target with new duties in retaliation for Trump's steel and aluminum tariffs, as opposed to broader reciprocal tariffs. This list could include items like U.S. meat, cereals, wine, wood, clothing, chewing gum, dental floss, vacuum cleaners, and toilet paper. One notable product is bourbon, which has attracted significant attention within the EU. The Commission has suggested a 50% tariff on bourbon, prompting Trump to threaten a 200% tariff on EU alcoholic beverages if the EU proceeds.

France and Italy, key wine exporters, have expressed concerns about the impact of these tariffs. The EU, heavily reliant on free trade, seeks broad support for its response to maintain pressure on Trump to enter negotiations. Luxembourg will host the first EU-wide political meeting on Monday since Trump's announcement, where ministers from the 27 EU countries will discuss the situation and coordinate a response.

The goal of the meeting is to present a unified message that the EU is willing to negotiate with Washington for the removal of tariffs, while also being prepared to take countermeasures if talks fail. There is a broad range of opinions among EU members on how to respond. France advocates for a broader response that goes beyond tariffs, with President Emmanuel Macron suggesting European companies suspend investments in the U.S. until the situation is clarified. Ireland, with nearly a third of its exports going to the U.S., calls for a "measured response," while Italy questions whether retaliatory action is necessary at all.

The EU's trade chief, Maros Sefcovic, has described his recent talks with U.S. officials as "frank," criticizing the U.S. tariffs as "damaging" and "unjustified." The counter-tariffs are set to be put to a vote on Wednesday and will likely be approved unless 15 EU members, representing 65% of the EU population, oppose them. The tariffs will take effect in two phases, with some starting on April 15 and the rest a month later.

In addition, Commission President Ursula von der Leyen is meeting with CEOs from the steel, automotive, and pharmaceutical sectors to evaluate the impact of the tariffs and determine the next steps.