The News
The European Union on Wednesday agreed tariffs on more than $20 billion of US goods, marking the bloc’s first retaliatory move against US President Donald Trump’s imposed steel duties.
The targeted goods come primarily from Republican states, such as soybeans from Louisiana and cigarettes from Florida. The bloc is set to discuss additional retaliatory measures next week after Trump’s extra 20% tariff on all EU imports came into effect Wednesday.
The European Union, which is America’s biggest trading partner, stressed that the escalation can be halted at any time, “should the US agree to a fair and balanced negotiated outcome.”
SIGNALS
Washington appears unwilling to entertain EU’s ‘negotiate first’ approach
The EU still hopes to find a negotiated settlement with Washington to avoid an escalating trade war, but officials are warning that Washington may not be ready to talk. So far, European officials have said outreach to the US has failed to make inroads, the Financial Times reported, and US President Donald Trump rejected the bloc’s “zero-for-zero” tariff proposal on all industrial goods. “Trump has made it clear that any pain to the U.S. economy caused by targeted tariffs will not serve as a deterrent to an escalation of tariffs,” a trade expert told The New York Times. “So there is no clear off ramp.”
The bloc considers using ‘trade bazooka’ to target US
The EU is considering using its anti-coercion instrument — the bloc’s so-called “trade bazooka” — to target a wider swathe of the US economy, including Big Tech firms and the financial services industry. While France, Germany, and Spain have pushed for it to be considered, a majority of EU ministers hope to avoid having to use the instrument, Politico reported. The measure would allow the EU to impose more retaliatory policies, such as banning services, excluding access to the single market, and restricting intellectual property rights. It also allows the EU to target individuals associated with the government, meaning it could be used against Elon Musk’s X or Tesla, an EU expert said, calling it “a significant, but potentially effective threat of escalation.”
Trump’s tariffs present both peril and promise for EU-China relations
Trump’s tariffs have sparked fears in Europe of a glut of cheap goods, as Chinese firms look to new markets for exports. “There probably will be a significant displacement effect at an incredibly fragile time, where many [European] industries are barely scraping by,” a former US ambassador to the EU told Politico. A massive trade diversion would worsen ties between Brussels and Beijing, but the EU has pressed for a “negotiated resolution” with China to contain the escalation in the face of Trump’s tariffs. Spain’s prime minister called for more balanced relations with Beijing, and the EU has restarted negotiations on Chinese electric vehicle tariffs. “There are two ways this could play,” an expert told The New York Times. “Europe is in a really tough position.”