The European Union (EU) is starting to respond to increasing trade provocation from the U.S. They are now pushing a second wave of countermeasures, targeting imports worth €72 billion. This comes in the wake of an earlier package of €21 billion in retaliatory tariffs. Initially, these tariffs were unilateral tariffs on US steel and aluminum products. The EU Commission’s move signals a robust approach to safeguarding the bloc’s economic interests amid ongoing discussions about transatlantic trade.
The proposal largely responds to the clear and present danger posed by US President Donald Trump’s declaration. Herein lies the danger of his plan to levy new 30% tariffs on imports from Europe on August 1. The dual-layered plan begins with €21 billion in tariffs. If talks do not lead to an acceptable agreement, a bigger €72 billion rescue package will come into play.
Details of the Proposed Countermeasures
The EU’s latest blacklist takes aim at around €72 billion ($84.1 billion) worth of US goods. This strategic move highlights the bloc’s larger ambition to counteract possible negative impacts from US protectionist trade policies. Maroš Šefčovič, Vice-President of the European Commission in charge of the Energy Union, underlined the cooperative approach underpinning this initiative by saying,
“Today, the Commission is sharing with the member states the proposal for the second list of goods… Member states will now begin discussions on the details.”
This collaborative effort among member states highlights the EU’s unified stance in navigating the complications arising from US trade threats. The Commission has been doing some extensive outreach with its members to hammer out the specifics of these countermeasures.
The original first tranche of €21 billion focuses in particular sectors. On its face, it’s true of course—particularly with its laser-like emphasis on steel and aluminum imports. In response, the EU agreed to put its rebalancing measures on these products on hold until early August. This would demonstrate their willingness to seek a diplomatic solution before escalating the fight with even more tariffs.
Economic Implications of Tariff Threats
The possible introduction of a 30% tariff by the United States would have “serious negative impacts” on transatlantic trade relations. Some experts are concerned that this decision could be disastrous for some sectors. They argue that it could similarly set off broader economic impacts for both areas.
Inflation is increasing across the globe, supercharged by global supply chain and logistical issues. In this environment, markets are increasingly sensitive to news on the trade front. The US Department of Labor Statistics releases the CPI on a monthly basis. At the moment, it is languishing at those same multi-decade highs. The Fed has settled on the idea that keeping inflation around 2 percent annually is necessary to sustain boom times.
The Federal Reserve is given a dual mandate to pursue price stability and maximum sustainable employment. These surging price pressures certainly complicate this task. Beyond this, they reveal wider economic trends that would likely be exacerbated by a rise in trade tensions.
EU’s Commitment to Negotiation
EU officials are continuing their hard line on countermeasures. They’re still committed to pushing hard for a negotiated resolution to the ongoing trade disputes. President Ursula von der Leyen has emphasized Brussels’ commitment to cooperating with Washington and seeking dialogue. This fact is evidenced by the approach and tenor of the parties—both showing a preference to deescalate and find a win-win solution.
Though the theater in D.C. is still unfolding, both sides are still incentivized to come back to the table. The EU’s strategy largely has been to defend its economic interests. Second, it seeks to foster a climate conducive to good faith bargaining. As negotiations continue, stakeholders from all sectors are watching closely for any signals that could affect their business and market.