Would Europe actually retaliate against Trump's tariffs?

Time of India

3 days ago

European Union
officials have spent this week working to finalize a plan to retaliate against President Donald
Trump
's tariffs, laying the groundwork to hit more than $100 billion worth of American imports with levies if negotiations on a new trade deal fail. But a question looms over that effort.
"If it comes to it, will they?" asked Frances Burwell, a fellow at the Atlantic Council's Europe Center, a research organization.
Officials from the 27-nation bloc have spent months preparing their plans to hit back, only to hold off in favor of more talks. In April,
EU
policymakers approved a plan to impose tariffs on 21 billion euros (nearly $25 billion) of American goods. But they abruptly suspended them in a show of goodwill when Trump pivoted at the last minute and paused some painful across-the-board tariffs. The goal was to negotiate.
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No deal was forthcoming.
Instead, Trump said on social media last week that he planned to impose 30% tariffs on the bloc starting Aug. 1. After that announcement, EU officials chose to again delay that first batch of retaliatory tariffs -- which had been suspended only through July 14 -- to allow room for more talks. But they have also redoubled their vow to respond forcefully if necessary.
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Now, EU trade officials are finishing up a second list of tariffs that would target an even longer list of American goods, one that amounts to 72 billion euros ($84 billion) of products that include
Boeing
airplanes and Kentucky bourbon. The list was sent to member states Monday, said diplomats who spoke on the condition of anonymity to discuss an internal process. National representatives have not yet voted on the list.
That push to prepare a retaliation plan is rooted in an uncomfortable reality. The EU would prefer to come up with a negotiated solution and avoid a painful and protracted trade war, but the talks could still fail. Strength, many politicians and ministers pointed out, seems to be the only negotiating language that Trump understands.
It is necessary to "flash some muscles," Lars Lokke Rasmussen, the Danish foreign minister, said Monday. "If you want peace, you have to prepare for war, and I think that's where we are."
But Europe is still trying to make a deal. Maros Sefcovic, the EU trade commissioner, talked to Howard Lutnick, the commerce secretary, on Monday. He was expected to speak with Jamieson Greer, the U.S. trade representative, on Tuesday. Trade experts who specialize in detailed negotiations were headed to Washington, Olof Gill, a
European Commission
spokesperson, said in a news conference.
But Sefcovic has said that European ministers have become more adamant about striking back if a negotiated solution could not be reached.
He had already spent months trying to reach a broad-brush agreement. Sefcovic and other negotiators thought that they were closing in on one up until last week -- only to have the situation blow up after Trump issued his threat last week to impose 30% tariffs.
"We have to protect the jobs, you have to protect the businesses," Sefcovic said at a news conference in Brussels on Monday.
Yet actually following through with the plan to hit back would be no easy choice.
Placing tariffs on American soybeans, handbags, machinery and other goods would make those products more expensive for consumers and businesses in France, Germany, Italy and other EU member states.
Given that, discussions over what products Brussels should target have been intense.
The tariffs that were prepared and nearly put into effect in April could be rolled out very quickly, because they were finalized and no longer up for debate. But they were always envisaged as only a first step: 21 billion euros' worth of goods is not a lot in the context of a 1.6 trillion euro trans-Atlantic trading relationship.
"We will continue to prepare further countermeasures so we are fully prepared," Ursula von der Leyen, the president of the European Commission, said Sunday.
EU member states would still need to vote to approve the second set of proposed tariffs that would apply to 72 billion euros worth of goods. The list initially covered 95 billion euros of products, but it was whittled down after feedback and lobbying.
After that, officials could consider using a new tool, the so-called anticoercion instrument, to target big technology firms or other American service companies by imposing trade or investment restrictions on them. Such a move could hit American businesses in the pocketbook, but because it would be so painful and risk escalating the trade war, it is sometimes referred to as the "nuclear option" in Brussels.
"We are not there yet," von der Leyen said Sunday, when asked about using the tool. "This is very important. This is now the time for negotiations."
Europe is still trying to speak gently while reminding the world that it carries several big sticks.
It would prefer not to use them.
Officials are hoping that a negotiated deal can be reached in the coming weeks and that the threatened 30% tariffs never come into effect. Tariffs hurt consumers on both sides of the Atlantic, they argue. By that logic, they say, delaying retaliation is a sign of rationality, not of timidity.
"I don't think this is weakness," Lokke Rasmussen said. "It's a clear signal that we don't want to escalate things."
Trying to shore up goodwill and hoping for the best has not been a winning strategy to date.
But "the pain threshold is quite high" for Europe to decide to retaliate, said Mujtaba Rahman, managing director for Europe at the Eurasia Group, a political risk consultancy.
Rahman added that things would have to go very badly -- an across-the-board tariff rate of perhaps 15%, along with charges on sectors -- for Europe to hit back. Officials will want to avoid angering the Trump administration, especially at a time when the bloc depends heavily on the United States to help with the war in Ukraine.
"The Americans will really need to go mad if the Europeans are going to retaliate," he said.
But if Trump follows through with his latest threat, that would firmly push the bloc over the edge, predicted Ignacio García Bercero, a former EU trade official who is now at Bruegel, an economic think tank.
"A 30% tariff would be no choice but to retaliate," he said.