The European Union approved tariffs on approximately €21 billion ($23.2 billion) of US goods on Wednesday, retaliating against the 25% duties President Donald Trump imposed last month on the bloc’s steel and aluminum exports.
A majority of the EU’s 27 member states voted in favor of these sanctions, some of which will begin taking effect in mid-April. The tariffs will target politically sensitive American states and include products such as soybeans from Louisiana, home to House Speaker Mike Johnson, as well as diamonds, agricultural products, poultry, and motorcycles.
Possibility of Tariff Suspension
The European Commission stated that the countermeasures can be suspended at any time “should the US agree to a fair and balanced negotiated outcome.”
This move deepens the growing transatlantic trade war. The US has already applied a universal 20% tariff on nearly all European exports and a separate 25% duty on cars and some auto parts. Trump has announced plans to impose additional tariffs on lumber, semiconductor chips, and pharmaceutical products. All of Trump’s new tariffs affect around €380 billion of EU goods.
Three Phases of Tariff Implementation
Some EU tariffs will take effect on April 15, another list will be imposed mid-May, and a third will start on December 1. Most targeted goods face a 25% tariff level, with some categories set to face 10% levies.
Bourbon was removed from the EU’s list following pressure from member states after Trump threatened 200% duties on wine, champagne, and other alcoholic beverages from France and elsewhere.
Trump’s Criticism of the European Union
Trump repeatedly attacks the EU, the US’s largest trading partner, claiming it was formed to “screw” the US. The EU’s trade-weighted average tariff rate was 2.7% in 2023, according to World Trade Organization data.
“They come up with rules and regulations that are just designed for one reason: that you can’t sell your product in those countries,” Trump said earlier this week.
Negotiation Efforts
The EU’s trade chief, Maros Sefcovic, discussed parameters of possible engagement with his American counterparts on Tuesday evening. Talks have yielded little progress so far, and US officials reportedly do not yet have a clear negotiating mandate from Trump.
European Unity and Economic Impact
Wednesday’s vote underscored the unity in EU capitals facing an escalating trade dispute. The American measures threaten to wipe out much of the euro-area expansion the European Central Bank forecasts for this year and next.
Additionally, the Commission is preparing a set of countermeasures to retaliate against the so-called reciprocal tariffs that took effect on Wednesday. It plans to announce these plans early next week and then begin consultations with member states.
History of Trade Disputes
For the EU, the fight over American metals tariffs began in 2018 during Trump’s first term, when the US imposed duties on European steel and aluminum exports worth nearly $7 billion.
Both sides agreed to a temporary truce in 2021, when the US partially removed its measures and introduced tariff-rate quotas above which duties on metals are applied, while the EU froze all its restrictive measures.
Key Insights for Investors:
- Trade War Escalation – The EU’s imposition of tariffs represents a significant escalation in trade tensions between the US and EU, which may impact global financial markets.
- Targeting Politically Sensitive Regions – The EU is strategically focusing its tariffs on products from regions significant to American political figures.
- Economic Impacts – The trade war could significantly limit eurozone economic growth in the coming years.
