U.S. President Donald Trump has announced that he will impose 25 percent tariffs on foreign steel and aluminum, as well as additional tariffs on several countries.
Polish newspaper Rzeczpospolita writes about nervous movements in Brussels, which is preparing for a response if President Trump decides to go to a trade war with the EU.
“The Polish presidency organized an urgent teleconference of EU ministers on Wednesday afternoon regarding the American announcements of a trade war. No decision has come into effect yet, so there can be no counter-decision from the EU, but in the face of increasingly decisive threats from the U.S. directed by President Trump, Europe must show unity,” one source told Rzeczpospolita.
American tariffs would be a serious blow to EU countries. The EU as a whole exports around €6 billion of steel and aluminum to the US annually, €3 billion for each of these raw materials.
Furthermore, when it comes to automobiles, the EU’s import duties are clearly unfair, with the EU hitting the U.S. with 10 percent duties on U.S.-made cars, while the U.S. rate is only 2.5 percent. Trump has long pointed to this imbalance. In addition, the EU charges VAT, which Washington treats as an additional fee.
The EU is arguing it cannot reduce its tariffs on the U.S. to 2.5 percent because then it would automatically (in accordance with the rules of the most favored nation clause) also have to reduce tariffs on car imports from other member states of the World Trade Organization (WTO), including China. And it is already in serious dispute with them when it comes to electric cars subsidized by Beijing.
With vehicles, the stakes are incredible for the EU compared, as the auto industry accounts for €65 billion in exports to the U.S., with 74 percent of the 920,000 cars sold in the U.S. produced by the three biggest German car manufacturers, Volkswagen, BMW and Mercedes. Car sales have fallen in Europe and sales are also shrinking in China, which means that the German car manufacturers cannot afford to lose the U.S. market either. Behind the scenes, there is heavy lobbying from the U.S. to avoid a trade war.
“We are deeply concerned about the possible imposition of tariffs by the United States. Instead of tit-for-tat tariffs, the EU and the U.S. should work together to reach a grand agreement to avoid a potential trade conflict,” said Sigrid de Vries, secretary general of ACEA, the EU’s automotive industry federation.
Brussels argues that starting a trade war is not in the interests of the U.S.
“The EU sees no justification for imposing tariffs on our exports, which are counterproductive. Tariffs are taxes, bad for businesses, even worse for consumers and harmful to the global trading system,” said Maros Sefcovic, EU trade commissioner.
The EU indicates that it will reduce the trade deficit with the U.S. by boosting purchases of liquified natural gas (LNG), which the EU needs anyway, and American weapons.
However, in the event that Trump slaps the EU with tariffs, there are countermeasures being prepared, including retaliatory tariffs. This already occurred during the previous trade war with Europe under the previous Trump administration, including products produced in states where Trump had substantial support, such as bourbon from Kentucky, Harley Davidson motorcycles from Wisconsin, and orange juice from Florida.
Since the last trade skirmish with Trump, the EU has also gained other ways to harass American producers. Since December 2023, it has had an instrument against economic coercion (ACI), which allows it to impose tariffs, restrictions on trade in services and trade-related aspects of intellectual property rights, as well as restrictions on access to foreign direct investment or public procurement. It can also attack technology companies that are dear to Trump’s heart. The EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) contain a wide range of measures to influence large internet platforms, which could hit companies like Google, Amazon, and Meta.
At the same time, there are worries that a trade war could quickly spiral, which could wreak economic havoc on both sides of the Atlantic.
