The News
US President Donald Trump said he would impose a 25% tariff on all European Union imports to the US, accusing the bloc of being “formed to screw the United States.”
The blanket duty escalated the prospect of a trade war with Europe, even as diplomatic tensions rise over Washington’s widely criticized rapprochement with Moscow over the war in Ukraine.
The European Commission said the bloc would “react firmly and immediately against unjustified barriers to free and fair trade,” the Financial Times reported, although it’s unclear what new duties the continent would seek to apply to the US, one of its biggest trading partners.
SIGNALS
Can the EU meaningfully retaliate?
The European Union has several options for a response, including retaliatory tariffs, but its trade deficit with the US ultimately falls in Washington’s favor, Reuters wrote. Another option would be to test the bloc’s Anti-Coercion Instrument, set up in 2023, which is aimed at providing a “structure to respond in a well-calibrated way to stop the coercion,” such as through legal means. Anything the EU does decide needs a majority vote to happen, though, and it is an open question as to whether the bloc can react swiftly in times of crisis, ING analysts noted. While the EU is better prepared for Trump now than they were in 2017, it still faces a complex challenge, and its effectiveness depends mostly on speed, analysts said.
Europe looks for ‘independence,’ creating an opening for Beijing
Another counter move at the European Union’s disposal would avoid engaging the US at all: Germany’s next chancellor called for “independence” from Washington after the country’s Feb. 23 election. But abandoning the US could deepen the continent’s already flagging economy, with Berlin likely to be one of the worst to suffer. That gives China an opening, Foreign Policy wrote. The tariffs create a common plight between the EU and Beijing. And while the EU walked away from a comprehensive trade deal with China in 2021, this option could be back on the table, a China expert told the outlet. A rapprochement of this kind would take time, however, as the EU remains wary of China’s warm relationship with Russia.