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What retaliatory action is the EU planning over Trump's tariffs?

What retaliatory action is the EU planning over Trump's tariffs?

Al Jazeera6 days ago
The European Union is readying a package of tariffs to be levied on 72 billion euros' ($84bn) worth of goods against the US, even as it steps up efforts to reach a trade deal and avert a transatlantic trade war with President Donald Trump.
The European Commission, which oversees EU trade policy, is understood to have drawn up a list of duties for various US imports, ranging from cars to bourbon, after Trump declared on Sunday that he would levy a 30 percent 'reciprocal' tariff on European imports from August 1.
The EU and the US have been locked in trade negotiations for months, after Trump set a reciprocal tariff of 20 percent on EU goods in April. Those were dropped to 10 percent shortly afterwards, pending a three-month pause, before the president's latest 30 percent salvo.
Following Trump's announcement, French and German government bond prices fell to lows seldom seen since the eurozone debt crisis of 2009-11, as traders fretted about whether the $1.7 trillion transatlantic trade relationship could remain intact.
What tariffs has Trump announced for the EU?
President Trump said he would impose a 30 percent tariff on goods imports from the EU starting on August 1. He says he wants to rebalance the $235.6bn trade deficit – whereby imports exceed exports – that the US has with the EU.
EU officials had been hoping they could limit the damage by agreeing a baseline tariff of about 10 percent – the level of the one currently in place – with additional carve-outs for key sectors like cars. But Trump's recent announcement, which came via a letter, dashed those hopes.
Trump has sent similar letters to 23 other trading partners over the past eight days, including Canada, Japan and Brazil, setting blanket tariff rates ranging from 20 percent to 50 percent, as well as a blanket 50 percent tariff on copper imports from all countries.
Earlier this year, Trump also slapped a 25 percent tariff on European steel and aluminium as well as cars, in an effort to reduce US dependence on imports and encourage more domestic production.
In response to that, the EU announced retaliatory tariffs on $23.8bn worth of US goods (totalling 6 percent of US imports), with EU officials describing the US tariffs as 'unjustified and damaging'. The implementation of these EU tariffs was delayed, however, as a gesture of goodwill during ongoing trade talks.
On April 7, the head of the European Commission, Ursula Von der Leyen, offered Trump an alternative in the form of a zero-for-zero tariffs deal on industrial goods, including cars. But Trump said her proposal did not address US concerns about the trade deficit.
How has the EU responded to the new US tariff?
Von der Leyen has previously indicated that the 27-member bloc will continue negotiating until the August 1 deadline.
On Monday, however, the EU commissioner for trade, Maros Sefcovic, said there was still a 'big gap' between the two sides and it would be 'almost impossible to continue the trading as we are used to in a transatlantic relationship', with the new 30 percent rate. 'Practically, it prohibits the trade,' he said.
The EU, therefore, is now readying retaliatory tariffs in the event that talks break down before the deadline, Sefcovic said. 'We have to protect the EU economy, and we need to go for these rebalancing measures.'
Before a meeting with EU ministers to discuss trade, he told reporters: 'Therefore I think we have to do, and I will definitely do, everything I can to prevent this super-negative scenario.'
The EU's latest tariff list, which covers 72 billion euros' ($84bn) worth of goods, has been seen by Politico and Bloomberg.
Though tariff rates are as yet unknown, they will apply to 11 billion euros' ($13bn) worth of US aircraft and parts. Other items include cars, machinery, electrical products and chemicals.
The list also covers agricultural products, including fruit and vegetables, as well as alcoholic drinks, such as bourbon and rum. Looking ahead, the Commission's trade policy committee will have to formally approve the list before any retaliatory measures can be applied.
The bloc is understood to be rife with disagreement over US trade, however. While Germany has urged a quick deal to safeguard its industries, other EU members – particularly France – insist that EU negotiators must not cave in to an 'asymmetric' deal in favour of the US.
On Monday, Danish Foreign Minister Lars Lokke Rasmussen told reporters in Brussels it was too early to impose countermeasures, 'but we should prepare to be ready to use all the tools'. He added: 'If you want peace, you have to prepare for war. And I think that's where we are.'
What and how much does Europe sell to the US?
In 2024, the US-EU goods trade reached nearly $1 trillion, making the EU the biggest trading partner of the US.
Overall, the US bought $235.6bn more in goods than it sold to the 27 countries that make up the EU. Trump has made no secret of wanting to reduce that trade deficit. On the other hand, the US earns a surplus on services with the EU.
The US mainly buys pharmaceutical products from the EU, as well as mechanical appliances, cars and other non-railway vehicles – totalling roughly $606bn. The US alone accounts for 21 percent of EU goods exports.
For its part, the US mainly exports fuel, pharmaceutical products, machinery and aircraft to the EU – to the tune of some $370bn.
How would tariffs affect the US and Europe's economies?
Economists at Barclays estimate that a US tariff on EU goods of 35 percent, covering both reciprocal and sectoral duties, along with a combined 10 percent theoretical retaliation from Brussels, would shave 0.7 percent from the eurozone output, lowering it to just 0.4 percent annual growth.
This could derail much of the eurozone's already meagre growth. The EU struggled to regain its footing in the wake of the COVID-19 pandemic, and the surge in energy prices following Russia's invasion of Ukraine has added to the strain.
The economic forecasting consultancy, Oxford Economics, estimated on Monday that a 30 percent tariff could push the EU 'to the edge of recession'.
An April estimate, meanwhile, by German economic institute IW, found that reciprocal and sectoral tariffs ranging from 20 percent to 50 percent would cost Germany's 4.3 trillion euro ($5 trillion) economy – the largest in the Eurozone – more than 200 billion ($232bn) euros between now and 2028.
'We would have to postpone large parts of our economic policy efforts because it would interfere with everything and hit the German export industry to the core,' German Chancellor Friedrich Merz said of the potential US 30 percent reciprocal rate.
Meanwhile, countermeasures from the EU would hit certain US industries hard. As Europe is a top-five market for US agriculture (particularly soya and corn), European tariffs could reduce US farm incomes and anger a key Trump constituency. The same is also true for the auto and plane parts sectors.
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