The European Union is preparing for a strong response to the latest round of tariffs imposed by US President Donald Trump. France and Germany are leading the charge for a more aggressive retaliatory approach, arguing that a forceful response could strengthen the EU’s position in ongoing trade negotiations.
Escalating Trade Tensions
On Wednesday, Trump announced a 20% tariff on EU imports, set to take effect on April 9. Justifying his decision, he claimed that the EU has taken advantage of the US in trade relations. In addition to these tariffs, the US has imposed even higher duties—over 50%—on Chinese imports, further escalating global trade tensions.
French President Emmanuel Macron has urged the EU to be ready with countermeasures, potentially targeting US technology and service industries. Macron emphasized the importance of maintaining negotiations but stressed that the EU must defend its economic interests with all available tools.
Meanwhile, German Vice Chancellor Robert Habeck strongly condemned the US decision, comparing it to an act of economic aggression. He called for a firm and proportionate response to prevent long-term damage to the European market.
EU’s Potential Countermeasures
In response to Trump’s tariffs, the EU is considering several countermeasures, including:
- Digital Services Tax: French officials have proposed implementing a digital services tax on US technology companies by the end of April. Given the US’s significant services trade surplus with the EU, such a tax could further strain relations between the two economies.
- Anti-Coercion Instrument (ACI): The European Commission is also weighing the use of its anti-coercion instrument, a powerful trade tool designed to counteract economic coercion by foreign nations. Although the ACI has never been deployed before, its activation could result in restrictions on US trade, services, and investments.
- Retaliatory Tariffs: The EU has already announced countermeasures worth €26 billion ($28.1 billion) in response to previous US tariffs on steel and aluminum. A second round of retaliatory tariffs targeting US goods is expected to take effect on May 15.
Diplomatic Negotiations and Future Prospects
Despite the tough rhetoric, EU officials, including European Commission President Ursula von der Leyen, have expressed a preference for a negotiated solution. However, concerns are rising within the EU as US trade representatives have shown little interest in diplomatic talks.
Macron has even suggested that European companies should reconsider investing in the US, arguing that funding American industries while facing tariffs is contradictory. German Chancellor Olaf Scholz echoed this sentiment, stating that the EU has a range of strategic options to defend its market.
Additionally, EU trade ministers are scheduled to meet on April 7 to discuss their response strategy. The European Commission is also preparing a “term sheet” outlining possible concessions to the US in an effort to reach a settlement.
Global Trade Implications
Trump’s tariffs represent some of the steepest trade barriers imposed by the US in a century, affecting multiple global economies. In response, European leaders are exploring alliances with other nations affected by US trade policies, such as Canada and Mexico.
Vice Chancellor Habeck emphasized the need for unity among US trading partners, stating, “New opportunities for alliances are emerging, and we should seize them with both hands.”
With tensions rising and economic stakes growing, the next few weeks will be crucial in determining whether the US and EU can find a compromise or if a full-scale trade conflict is inevitable.
